Optimal Multiperiod Pricing with Service Guarantees

Christian Borgs · Ozan Candogan · Jennifer Chayes · Ilan Lobel · Hamid Nazerzadeh

60 citations0/0 files storedManagement Science

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Supply Chain and Inventory Management Consumer Market Behavior and Pricing Advanced Queuing Theory Analysis

Abstract

We study the multiperiod pricing problem of a service firm with capacity levels that vary over time. Customers are heterogeneous in their arrival and departure periods as well as valuations, and are fully strategic with respect to their purchasing decisions. The firm's problem is to set a sequence of prices that maximizes its revenue while guaranteeing service to all paying customers. We provide a dynamic programming based algorithm that computes the optimal sequence of prices for this problem in polynomial time. We show that due to the presence of strategic customers, available service capacity at a time period may bind the price offered at another time period. This phenomenon leads the firm to utilize the same price in multiple periods, in effect limiting the number of different prices that the service firm utilizes in optimal price policies. Also, when customers become more strategic (patient for service), the firm offers higher prices. This may lead to the underutilization of capacity, lower revenues, and reduced customer welfare. We observe that the firm can combat this problem if it has an ability, beyond posted prices, to direct customers to different service periods. This paper was accepted by Dimitris Bertsimas, optimization.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 60 citations exist upstream.

References

1982Dynamic Noncooperative Game Theory 1972Durability and Monopoly 1994Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons 2002Robust optimization ? methodology and applications 2004Revenue Management Under a General Discrete Choice Model of Consumer Behavior 2003An Overview of Pricing Models for Revenue Management 2006A Robust Optimization Approach to Inventory Theory 1986Foundations of dynamic monopoly and the coase conjecture

Cited by

2018Dynamic Incentive-Aware Learning: Robust Pricing in Contextual Auctions 2016Revenue Management of Reusable Resources with Advanced Reservations 2017Dynamic Pricing for Heterogeneous Time-Sensitive Customers 2019On the Efficacy of Static Prices for Revenue Management in the Face of Strategic Customers 2019Joint Pricing and Inventory Management with Strategic Customers 2017Revenue-Maximizing Mechanisms with Strategic Customers and Unknown, Markovian Demand

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.