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Student Number 954206016
Author Mei-chun Kuo(³¢¬ü§¡)
Author's Email Address connie803@hotmail.com
Statistics This thesis had been viewed 1377 times. Download 581 times.
Department Graduate Institute of Industrial Management
Year 2007
Semester 2
Degree Master
Type of Document Master's Thesis
Language English
Title Dynamic Pricing with Price-affected Reservation Price Distribution
Date of Defense 2008-06-19
Page Count 40
Keyword
  • Dynamic pricing
  • Markdown
  • Reservation price
  • Abstract We propose a structure of price-affected reservation price distribution to solve the pricing problem that price will influence customers¡¦ reservation price distribution during the selling horizon. The structure is introduced to describe how the customers¡¦ reservation price distribution changes by price at each selling period. Two important parameters and will be the determinants of customers¡¦ reservation price distribution that presents the product characteristic and presents the selling channels. Since the sales activity (promotion) is common seen in the market, we take a reverse way back to use a higher price to increase customers¡¦ reservation price for the product in the regular selling time and hold a sales activity at the last selling period with a lower price to increase the demand of the product hoping to cover the loss caused by the higher price in the previous periods to make the total profit be maximized. The structure exists recursive relation of reservation price between two continuous selling periods, and the prices are determined dynamically.
      We use the single-cycle model to describe the markdown problem. Three models are then developed to show how the prices change when a markdown is considered. Many observations will be helpful to explain the customers purchasing behaviors and the selling phenomena in market. Product characteristics and the selling strategy will be the important factors in the structure while sellers decide the prices to achieve the profit maximization. 
      Therefore, the purpose of this paper is not only to solve a markdown problem but also to observe customers¡¦ reservation price distribution changes with the prices we decide to sell. Sensitivity analysis of parameters and the length of the selling horizon influences customers¡¦ reservation price distribution and profit will be conducted.
    Table of Content AbstractI
    1. Introduction4
    2. Literature review6
    2.1. Markdown issues6
    2.2. Dynamic pricing7
    2.3. Reservation price8
    3. Price-affected reservation price distribution9
    3.1. Price-affected reservation price distribution9
    3.2. Product characteristics ¡V Parameter 14
    3.3. Selling channels - Parameter 15
    3.4. Profit optimization of price based on price-affected reservation price distribution19
    4. Assumptions and Formulations24
    4.1. Markdown pricing problem25
    4.1.1. Model 1 ¡V Basic model without markdown26
    4.1.2 Model 2 ¡V Single markdown26
    4.1.3 Model 3 ¡V Multiple markdowns27
    4.2. Numerical examples28
    5. Sensitivity Analysis30
    5.1. Sensitivity Analysis of parameter 30
    5.2. Sensitivity Analysis of selling horizon for average profit31
    5.3. Sensitivity analysis of parameter A and manufacturing cost34
    6. Summary and conclusion38
    7. Future research40
    References42
    Reference 1. Bhargawa, H., Choudhary, V. (2001), ¡§Second-degree price discrimination for information goods under nonlinear reservation price distribution functions¡¨, HICSS-34, Vol. 7.
    2.Bitran, G., Mondschein, S. (1997), ¡§Periodic pricing of seasonal products in retailing¡¨, Management Science, Vol. 43, No. 1, pp. 64-79
    3.Bitran, G., Caldentey, R., Mondschein, S. (1998), ¡§Coordinating clearance markdown sales of seasonal products in retail chains¡¨, Operational Research, Vol. 46, No. 5, pp. 609-624.
    4.Elmaghraby, W., Keskinocak, P. (2003), ¡§Dynamic pricing in the presence of inventory considerations: research overview, current practices, and future directions¡¨, Management Science, Vol. 49, No. 10, pp. 1287-1309.
    5.Elmaghraby, W., Gulcu, A., Keskinocak, P. (2001), ¡§Analysis of a price markdown mechanism¡¨, WECWIS, pp. 170-177.
    6.Gupta, D., A. V. Hill, Bouzdine-Chameeva , T. (2006), ¡§A pricing model for clearing end-of-season retail inventory¡¨, European Journal of Operational Research , Vol. 170, pp. 518-549.
    7.Houthakker, H. S. (1950), ¡§Revealed preference and reservation price distribution function¡¨, Ecnomica, New Series, Vol. 17, No.66, pp. 159-174
    8.Hugonnier, J., Kramkov D., Schachermayer, W. (2005), ¡§On reservation price distribution-based pricing of contingent claims in incomplete markets¡¨, Mathematical Finance, Vol.15, No.2, pp.203-212.
    9.Lazear, E. P. (1986), ¡§Retail pricing and clearance sales¡¨, The American Economic Review, Vol. 76, No. 1, pp. 14-32.
    10. Mantrala, M. K. (1994), ¡§An implementable approach for optimizing department store markdown decisions¡¨, Retailing Review, Vol. 76, No. 4, pp. RR1-RR6.
    11. Pashigian, B. P., Bowen, B. (1991), ¡§Why are products sold on sale? Explanations of pricing regularities¡¨, The Quarterly Journal of Economics, Vol. 106, No. 4, pp. 1015-1038.
    Advisor
  • Fu-Shiang Tseng(´¿´I²»)
  • Files
  • 954206016.pdf
  • approve immediately
    Date of Submission 2008-06-25

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