A nonatomic‐game model for timing clearance sales under competition |
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Authors: | Jian Yang Yusen Xia Xiangtong Qi Yifeng Liu |
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Affiliation: | 1. Department of Management Science and Information Systems, Rutgers University, , New Jersey;2. Department of Managerial Sciences, J. Mack Robinson College of Business, Georgia State University, , Atlanta, Georgia;3. Department of Industrial Engineering and Logistics Management, Hong Kong University of Science and Technology, , Hong Kong |
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Abstract: | We deal with dynamic revenue management (RM) under competition using the nonatomic‐game approach. Here, a continuum of heterogeneous sellers try to sell the same product over a given time horizon. Each seller can lower his price once at the time of his own choosing, and faces Poisson demand arrival with a rate that is the product of a price‐sensitive term and a market‐dependent term. Different types of sellers interact, and their respective prices help shape the overall market in which they operate, thereby influencing the behavior of all sellers. Using the infinite‐seller approximation, which deprives any individual seller of his influence over the entire market, we show the existence of a certain pattern of seller behaviors that collectively produce an environment to which the behavior pattern forms a best response. Such equilibrium behaviors point to the suitability of threshold‐like pricing policies. Our computational study yields insights to RM under competition, such as profound ways in which consumer and competitor types influence seller behaviors and market conditions. © 2014 Wiley Periodicals, Inc. Naval Research Logistics 61: 365–385, 2014 |
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Keywords: | revenue management nonatomic game threshold pricing policy |
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