Thursday, 13:15 - 13:40 h, Room: H 3021


Xiuli Chao
Dynamic pricing decision for a monopoly with strategic customers and price adjustment

Coauthor: Beryl B. Chen


We consider a monopoly firm selling a product over a finite planning horizon to a finite customer base. Each customer requires at most one product and decides whether and when to purchase the product. The customers are strategic and forward looking in making their purchasing decisions. The firm's objective is to set the selling price in each period to maximize its total discounted revenue. We analyze the effect and benefit for the firm's strategy to offer a price adjustment. Our research questions are the following: How does the price adjustment strategy affect the optimal selling price in each period and the consumer behavior, who benefits and who is hurt by this price adjustment strategy? The problem is modeled as a dynamic game and we obtain Markov subgame perfect equilibrium. We show that, depending on the system parameters, the optimal pricing strategy has several interesting patterns. These results are then applied to answer the research questions raised above. We also offer the managerial insights yielded from this model.


Talk 1 of the invited session Thu.2.H 3021
"Combinatorial optimization under uncertainty" [...]
Cluster 2
"Combinatorial optimization" [...]


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