Informs 2015

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INFORMS Philadelphia – 2015
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SB43
43-Room 103A, CC
New Directions in Revenue Management
Sponsor: Revenue Management and Pricing
Sponsored Session
Chair: Dan Iancu, Assistant Professor, Stanford University, 655 Knight
Way, Stanford, CA, 94305, United States of America,
Co-Chair: Omar Besbes, Professor, Columbia University, Graduate
School of Business, New York, NY, 10027, United States of America,
Co-Chair: Nikolaos Trichakis, HBS,
1 - Dynamic Pricing in the Presence of Consumers with
Stochastically Changing Valuations
Ying Liu, Stern School of Business, New York University,
44 West 4th Street, KMC 8-154, New York, NY, 10012,
United States of America, , Rene Caldentey,
Guillermo Gallego
Motivated by Revenue Management applications, we consider a firm selling a
finite inventory of a perishable product to a population of price sensitive
customers. We consider the case in which consumers’ valuation for the product is
not static but rather changes stochastically over time after they purchase the item.
The firm can take advantage of this feature to buy back some units and resell
them to new arrivals. We investigate the structure of an optimal buy/sell dynamic
pricing strategy.
2 - Financing Capacity Investment under Demand Uncertainty
Francis De Vericourt, Professor, ESMT, Schlossplatz 1, Berlin,
101178, Germany, , Denis Gromb
We consider the capacity choice problem of a firm whose access to external capital
markets is hampered by moral hazard. The firm must therefore not only calibrate
its capacity investment, but also optimize its sourcing of funds. We find that when
higher demand realizations are more indicative of high effort, debt financing is
optimal. In this case, the optimal capacity is never below the efficient capacity
level but sometimes strictly above that level.
3 - Points for Peanuts or Peanuts for Points: Dynamic Management
of Loyalty Programs
So Yeon Chun, McDonough School of Business, Georgetown
University, 3700 O St. NW, Washington, DC, United States of
America, , Nikolaos Trichakis, Dan Iancu
We study the problem of dynamically managing a loyalty program. While
originally viewed as marketing efforts, in the last two decades loyalty programs
have grown substantially in size and scope, to the extent that they now often
significantly interact with other firm functions, including operations, accounting
and finance. We develop a dynamic programming model to study the problem of
optimally setting prices and point requirements.
4 - Dynamic Pricing under Convex Incentives
Dan Iancu, Assistant Professor, Stanford University, 655 Knight
Way, Stanford, CA, 94305, United States of America,
, Omar Besbes, Nikolaos Trichakis
We discuss optimal dynamic pricing policies when certain convex incentives
govern the terminal payoffs. These could arise in a multitude of settings, including
debt financing or sales incentives.
SB44
44-Room 103B, CC
Models of Customer Behavior
Sponsor: Revenue Management and Pricing
Sponsored Session
Chair: Xuanming Su, The Wharton School, University of Pennsylvania,
Philadelphia, United States of America,
Co-Chair: Jaelynn Oh, The University of Utah , 1655 East Campus
Center Drive , Spencer Fox Eccles Business Building, Salt Lake City UT,
1 - Mass Customization, Externalities, and Guardrail Products: ìYou
Can’t be all Things to all Peopleî
Eren Cil, University of Oregon, 1585 East 13th Avenue,
Eugene, OR, United States of America, ,
Michael Pangburn
Firms employ mass customization to closely match customers’ taste with the
delivered product. We additionally consider the brand-level issue of mismatch
between customers’ tastes and the firm’s full range of products. We show that
such a brand-level mismatch limits the usage of mass customization, even when
costless to the firm, and makes the firm employ differential pricing.
2 - Cannibalization in Secondary Markets
Wedad Elmaghraby, Associate Professor, University of Maryland,
University of Maryland, 4311 Van Munching Hall, College Park,
MD, 20742, United States of America,
We present results from a field experiment conducted on the platform of a leading
business-to-business wholesale liquidators. By manipulating starting prices for
auctions of iPads, we explore the presence of cannibalization and reference price
effects in these online markets.
3 - Advance Selling with Reservations: Optimal Pricing and
Overbooking Strategies
Jaelynn Oh, Xuanming Su
Customers who make reservations in advance are guaranteed service when they
show up. We study whether and how firms should charge for reservations and
relate our results to advance selling strategies.
4 - Trade-in Remanufacturing, Strategic Customer Behavior, and
Government Subsidies
Renyu Zhang, Doctoral Student, Olin Business School,
Washington University in St. Louis, Campus Box 1133,, 1
Brookings Drive, St. Louis, MO, 63130, United States of America,
, Fuqiang Zhang
We study the impact of remanufacturing under strategic customer behavior and
government subsidies. We find that trade-in remanufacturing can serve as an
effective mechanism to mitigate strategic customer behavior, and that the
adoption of remanufacturing and the government subsidies for remanufactured
products may not lead to an environmentally better outcome. We also
characterize the government subsidy/tax scheme that can induce the socially
optimal outcome.
SB45
45-Room 103C, CC
Retail Pricing
Sponsor: Revenue Management and Pricing
Sponsored Session
Chair: Goker Aydin, Indiana University, 1309 East Tenth Street,
Bloomington, IN, 47405, United States of America,
1 - Group Buying under Consumer’s Uncertainty
Victor Araman, American University of Beirut, Beirut, Lebanon,
, Skander Esseghaier
We develop a model of group buying under consumer uncertainty where a
consumers’ decision to acquire information and decision to share the acquired
information is endogenously determined as a result of a game between these
consumers. We determine the optimal group buying strategies and show that
when there is sufficient heterogeneity across consumers with respect to their cost
of information search and acquisition, group buying dominates the more
traditional individual selling strategy.
2 - Online Inventory Disclosure: Consumer Uncertainty
and Experience
Tolga Aydinliyim, Baruch College, One Bernard Baruch Way,
Dept of Management Box B9-240, New York, United States of
America, Michael Pangburn,
Elliot Rabinovich
Given varied consumer perceptions of inventory information, online retailers’
presentation of such information influences purchase behavior. We investigate
optimal inventory disclosure policies assuming two distinct consumer segments:
savvy consumers who can predict a retailer’s stock levels (even when masked)
and naïve consumers who rely on priori (stochastic) beliefs regarding inventory.
3 - Better Late than Now: Delayed vs. Instantaneous Retail
Price Discounts
Monire Jalili, University of Oregon, 1208 University of Oregon,
Eugene, United States of America, ,
Michael Pangburn
Retailers commonly offer a percent off a purchase and apply it either immediately
or toward a future purchase. Permitting rational, forward-looking consumers, we
prove that delayed discounting can improve profitability if the market is
heterogeneous.
SB43