Sales Disclosure and Pricing Policies in the Presence of Social Learning

This study analyzes the role of sales disclosure and social learning (SL) in firms’ optimal responsive pricing policies and profits. If sales quantities are disclosed, potential customers will increase (decrease) their willingness to pay for the product based on the observation of relatively high (low) sales. In a monopoly market, a firm can control initial sales through the initial price, thus influencing consumers’ SL outcomes. We find that disclosing sales quantities and enhancing SL are always beneficial for a firm in a monopoly context. With an increase in the intensity of SL, a monopoly firm has a higher incentive to decrease the initial price of a product to attract early buyers, which is beneficial for consumers. However, consumer surplus may decrease if consumers’ purchase intentions are strongly driven by historical sales quantities. In a duopoly market, learning based on historical sales quantities can encourage potential customers but intensify competition between firms. Thus, in a competitive market, sales disclosure and SL are only beneficial to firms when consumers’ intrinsic valuation of a product is relatively low. Otherwise, SL harms firms.

A Responsive-Pricing Retailer Sourcing from Competing Suppliers Facing Disruptions

Problem definition: We study a problem of a retailer that orders from competing strategic suppliers subject to independent or correlated disruptions and responds by setting the retail price on delivery, called responsive pricing. The suppliers set their wholesale prices in a Nash game. Academic/practical relevance: Supplier disruption correlation exists for reasons such as product and service designs, geographic proximity, and common tier 2 suppliers. In practice, many retailers are able to set the product price after knowing the delivered quantity. Methodology: We model this problem as a Stackelberg–Nash game with the suppliers as the leaders and the retailer as the follower and obtain its equilibrium explicitly. We perform sensitivity analyses with respect to suppliers’ production costs, reliabilities, and their correlation. Results: We find, surprisingly, that an increase in the reliability of a supplier may, counter to our intuition, hurt it because of the competition between the suppliers selling to a responsive-pricing retailer. Furthermore, in contrast to the literature, we find that under responsive pricing, a high disruption correlation may benefit a supplier that has a cost advantage, and the total order quantity may increase in that correlation because of supplier competition. Managerial implications: This paper has important implications for unreliable suppliers because the way reliability and correlation influence their profits depends on the retailer’s pricing power and the competition intensity between the suppliers. With a responsive-pricing retailer, a supplier may not benefit from higher reliability but may benefit from a higher correlation. This suggests that a low-cost supplier serving a responsive-pricing retailer could add to its decision-making tools a new incentive of creating a positively correlated supply network by building plants in the geographic location of its competitor or sourcing from the same tier 2 supplier to obtain an increased correlation strategically.

Modelling Quality and Pricing in Next Generation Telecom Networks

This chapter aims to provide new possibilities for service providers to enhance their revenues using the appropriate pricing scheme. Features and applicability of responsive pricing scheme and hybrid pricing for charging end users in next generation network are discussed. Game theory is used as an underlying concept for the implementation of pricing. In addition, transparent mapping of quality of service parameters to quality of business are considered, encompassing service price dependence on quality of service violation, which is consequently reflected on service provider's revenue.

Role of Risk Aversion in Price Postponement Under Supply Random Yield

Price postponement is an effective mechanism to hedge against the adverse effect of supply random yield. However, its effectiveness and the resulting production decisions have not been studied for risk-averse firms. In this paper, we investigate the impact of price postponement and risk aversion under supply yield risk. Specifically, we study a risk-averse monopoly firm’s production and pricing decisions under supply random yield with two distinct pricing schemes: (1) ex ante pricing in which the firm simultaneously makes the sales price and sourcing decisions before production takes place and (2) responsive pricing in which the pricing decision is postponed until after the production yield realization. We adopt conditional value at risk (CVaR) as the risk-aversion measurement and investigate the impact of the firm’s risk-aversion level on its optimal decisions and the corresponding profit. Among other results, we show that, for each pricing scheme, there exists a unique risk-aversion threshold under which the firm chooses not to produce. Interestingly, price postponement has no impact on the risk-aversion threshold as the cutoff values under both pricing schemes are the same. We further show that the value of CVaR improvement from responsive pricing may not be monotonic in the firm’s risk-aversion level. Consequently, our results indicate that, although price postponement induces operational flexibility by better matching demand with available supply, whether the firm should adopt responsive pricing needs to be carefully evaluated as the benefit may not justify the potential fixed cost associated with price postponement, especially for a highly risk-averse firm. In addition, we show that responsive pricing, even with its ex post revenue-maximization behavior, benefits the end-market consumers in equilibrium. Finally, we conduct extensive numerical studies to check and confirm the robustness of our results. This paper was accepted by Charles Corbett, operations management.

Pricing Decisions on Reward-Based Crowdfunding with Bayesian Review System Facing Strategic Consumers

Crowdfunding marks a popular and sustainable means by which small and microentrepreneurs obtain financial resources for their innovative project. Consumers increasingly rely on online reviews to make purchase decisions. However, the crowdfunding nowadays lacks a form type of review system. This paper is designed to extend research on the optimal pricing decision with review system for the reward-based crowdfunding. Firstly, a Bayesian analysis is established to construct consumers’ belief update process in presence of review system. Secondly, we take the strategies without the review system as a benchmark to explore the impacts of review system under preannounced pricing and responsive pricing. Finally, through the equilibrium analysis, we find that the review system has a positive impact on the creator under responsive pricing policy. The fraction of favorable review has a large effect on the profit of preannounced pricing. When the fraction is about 80%, the profit is the maximum. Generally speaking, the review system will make more profit for the creator.