Designing Optimal Preannounced Markdowns in the Presence of Rational Customers with Multiunit Demands
AbstractWe analyze the optimal design of a markdown pricing mechanism with preannounced prices. In the presence of limited supply, buyers who choose to purchase at a lower price may face a scarcity in supply. Our focus is on the structure of the optimal markdown mechanisms in the presence of rational or strategic buyers who demand multiple units. We first examine a complete information setting where the set of customer valuations is known but the seller does not know the valuation of each individual customer (i.e., cannot exercise perfect price discrimination). We then generalize our analysis to an incomplete valuation information setting where customer valuations are drawn from known distributions. For both settings, we compare the seller's profit resulting from the optimal markdown mechanism and the optimal single price. We provide a number of managerial insights into designing profitable markdown mechanisms.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Manufacturing & Service Operations Management.
Volume (Year): 10 (2008)
Issue (Month): 1 (June)
pricing; markdown; strategic bidding; price discrimination;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Li, Yongjian & Wei, Cansheng & Cai, Xiaoqiang, 2012. "Optimal pricing and order policies with B2B product returns for fashion products," International Journal of Production Economics, Elsevier, vol. 135(2), pages 637-646.
- Kuo, Chia-Wei & Huang, Kwei-Long, 2012. "Dynamic pricing of limited inventories for multi-generation products," European Journal of Operational Research, Elsevier, vol. 217(2), pages 394-403.
- Liang, Xiaoying & Ma, Lijun & Xie, Lei & Yan, Houmin, 2014. "The informational aspect of the group-buying mechanism," European Journal of Operational Research, Elsevier, vol. 234(1), pages 331-340.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.