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Full-Text Articles in Business
Revenue Management With Dynamic Pricing And Advertising, Leo Macdonald, Henning Rasmussen
Revenue Management With Dynamic Pricing And Advertising, Leo Macdonald, Henning Rasmussen
Leo MacDonald
In this article, we analyze the temporal pricing and advertising strategy of a monopolist with a fixed inventory to sell over a finite horizon. The arrival of the customers is modeled by a Poisson process where the arrival rate is given by an increasing convex function of the advertising expenditure, and the willingness of a customer to pay is modeled by a decreasing function of the price. For specific functions for the arrival rate and willingness-to-pay, we derive and solve a system of ordinary differential equations for the optimal pricing and advertising strategy. We show that this optimal strategy is …
A Comparison Of Different Demand Models For Joint Inventory-Pricing Decisions, John Wilson, Leo Macdonald, Chris Anderson
A Comparison Of Different Demand Models For Joint Inventory-Pricing Decisions, John Wilson, Leo Macdonald, Chris Anderson
Leo MacDonald
Pricing and inventory research often focuses on stylized models to illustrate pricing and ordering decision dynamics. Although decision insight is useful, the individual retailer faces tougher decisions on actually modeling demand. In an effort to understand the impact of demand modeling choices on inventory and pricing decisions, we evaluated different price-dependent demand models and the resulting profit produced through their implementation. To avoid complications created by other demand drivers, for example promotional and advertising activities, we illustrate the impacts with data from a name-your-price retailer selling a commoditized product where price is the key driver. As our data are provided …