Dynamic price competition with discrete customer choices
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Authors
Lin, Kyle Y.
Sibdari, Soheil Y.
Subjects
Dynamic pricing
Revenue management
Duopoly
Oligopoly
Discrete choice model
Revenue management
Duopoly
Oligopoly
Discrete choice model
Advisors
Date of Issue
2008
Date
Publisher
Language
Abstract
For many years, dynamic pricing has proven to be an effective tool to increase revenue in the airline and other service industries. Most
studies, however, focused on monopolistic models and ignored the fact that nowadays consumers can easily compare prices on the Internet.
In this paper, we develop a game-theoretic model to describe real-time dynamic price competition between firms that sell substitutable
products. By assuming the real-time inventory levels of all firms are public information, we show the existence of Nash equilibrium.
We then discuss how a firm can adapt if it knows only the initial – but not the real-time – inventory levels of its competitors. We compare
a firm’s expected revenue under different information structures through numerical experiments.
Type
Article
Description
Series/Report No
Department
Operations Research
Organization
Identifiers
NPS Report Number
Sponsors
Funding
Format
Citation
European Journal of Operational Research, Vol. 197, (2009), pp. 969–980
Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.