Topic
Dynamic pricing
About: Dynamic pricing is a research topic. Over the lifetime, 4144 publications have been published within this topic receiving 91390 citations. The topic is also known as: surge pricing & demand pricing.
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TL;DR: In this article, the authors highlight the idea that technology-enabled decentralized coordination can achieve the same, or better, economic and reliability benefits when compared to utility-focused centralized physical and economic control.
57 citations
TL;DR: In this paper, the authors consider the impact of price-driven substitution on a firm's pricing and production capacity decisions for a single period, when the firm sells to multiple market segments.
Abstract: Firms may produce a variety of generally similar products or may practice “scientific pricing” or revenue management where the firm will offer similar or somewhat differentiated products in multiple market segments at different prices. Whenever generally similar products are available, the demand for the products is linked through the ability of the customer to substitute one product for another. One widely known type of demand substitution is referred to as inventory-driven substitution where a customer will substitute for a product that is out of stock by buying a similar product. A second type of substitution occurs as a response to price-differences when a customer substitutes a less expensive product for a similar higher priced product. As firms use dynamic pricing to match demand with inventory or capacity while maximizing revenue or contribution, there is a need to take into account the fact that the creation of price differences between market segments will motivate customers to try to switch from higher priced segments to lower priced segments leading to price-driven product substitution. If the firms' price behavior leads to stockouts, inventory-driven product substitution may also occur. Both these effects will impact the firms' price and production capacity decisions. In this paper, we consider the impact of price-driven substitution on a firm's pricing and production capacity decisions for a single period, when the firm sells to multiple market segments. We show that revenue managers and supply chain coordinators should adapt product prices in each market segment and order quantities to take into account substitution by customers and the costs of supplying product to each market. We develop both deterministic and stochastic models with substitution as a result of price-differences. We investigate the impact of the symmetrical and asymmetrical demand substitution on optimal prices, production levels and revenue or contribution and the impact of changes in the production cost on the optimal solutions.
57 citations
TL;DR: In this paper, the authors estimate a model of dynamic airline pricing accounting for both intertemporal price discrimination and dynamic adjustment to stochastic demand with new flight-level data and show that the forces are complements in airline markets and lead to significantly higher revenues, as well as increased consumer surplus, compared to a more restrictive pricing regime.
Abstract: Airfares are determined by both intertemporal price discrimination and dynamic adjustment to stochastic demand. I estimate a model of dynamic airline pricing accounting for both forces with new flight-level data. With model estimates, I disentangle key interactions between the arrival pattern of consumer types and remaining capacity under stochastic demand. I show that the forces are complements in airline markets and lead to significantly higher revenues, as well as increased consumer surplus, compared to a more restrictive pricing regime. Finally, I show that abstracting from stochastic demand leads to a systematic bias in estimating demand elasticities.
57 citations
16 Jan 2012
TL;DR: This paper presents a solution to the problem of optimally scheduling a set of residential appliances under day-ahead variable peak pricing in order to minimize the customer's energy bill (and also, simultaneously spread out energy usage).
Abstract: A key component of the smart grid is the ability to enable dynamic residential pricing to incentivize the customer and the overall community to utilize energy more uniformly. However, the complications involved require that automated strategies be provided to the customer to achieve this goal. This paper presents a solution to the problem of optimally scheduling a set of residential appliances under day-ahead variable peak pricing in order to minimize the customer's energy bill (and also, simultaneously spread out energy usage). We map the problem to a well known problem in computer science - the multiple knapsack problem - which enables cheap and efficient solutions to the scheduling problem. Results show that this method is effective in meeting its goals.
57 citations
TL;DR: In this paper, the authors studied the existence of collusion in the retail gasoline market in the city of Santiago, Chile, using a data set of weekly gas station prices that covers a period of almost four years.
Abstract: Asymmetric-price adjustment is a common phenomenon in many markets around the world, particularly in retail gasoline markets. This paper studies the existence of this phenomenon in the retail gasoline market in the city of Santiago, Chile, using a data set of weekly gas station prices that covers a period of almost four years. We found that prices adjust asymmetrically, and the asymmetry is different for branded gas stations and unbranded stations. In addition, we found that the asymmetry for high-margin stations is statistically equivalent to that for low-margin stations. This evidence is suggestive of collusion as a rationale for the asymmetric pricing policy observed.
57 citations