Dynamic pricing for perishable assets and multiunit demand
Date of Issue2014
College of Business (Nanyang Business School)
With the widespread application of dynamic pricing strategies across a variety of industries, the traditional dynamic pricing is usually implemented by coupling with technique from other disciplines. Thus, in this dissertation, we analyze three dynamic pricing problems in the context of nonuniform pricing from economics, supply chain, and sales effort from marketing respectively. Motivated by simultaneous multi-unit demand and customer choice behavior in the retailing industry, we first endogenize the purchase quantity and study the problem of dynamic pricing of limited inventories over a finite horizon to maximize expected revenues. We examine three types of dynamic pricing schemes: the dynamic nonuniform pricing (DNP) scheme, the dynamic uniform pricing (DUP) scheme, and the dynamic block pricing (DBP) scheme. For DNP scheme, we have identified a necessary and sufficient condition for the structural properties of optimal policy. The relationship among these three schemes is examined and the magnitude of revenue impact for these schemes is explored. Second, we study a supply chain with one supplier and a retailer where the retailer practices dynamic pricing. Compared to the decentralized system, we find the centralized one is a Pareto improvement in terms of profit and consumer surplus. Moreover, we develop a stylized approach to evaluate various supply chain contracts, and find a necessary and sufficient condition for an independent contract to coordinate the system. Extensive numerical experiments are conducted to evaluate the values of pricing flexibility and coordination. Chapter 4 addresses the problem for a firm that dynamically adjusts both effort and price for selling limited quantities of product before some given time. We model the retailer’s problem as a dynamic program, in which both the revenue from selling the product and the cost for exerting sales effort are embedded in each period. We characterize the optimal effort and price as functions of the inventory level and the remaining selling time. Furthermore, we demonstrate that the optimal effort level is increasing with the remaining inventory and decreasing with the remaining selling time, regardless of whether the retailer revises the price dynamically or not. Finally, we summarize and give some future research directions.