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Product price alignment with seller service rating and consumer satisfaction

Author

Listed:
  • Renato Matta

    (University of Iowa)

  • Timothy J. Lowe

    (University of Iowa)

Abstract

Empirical studies have shown strong evidence that a seller with a better customer feedback score is able to charge a higher price for his/her product or service. We study the problem faced by the seller of setting the price with the objective of maximizing expected revenue over a finite number of periods. Modeling the problem requires building a system of processes that includes: (1) the customer arrival and formation of customer reservation price; (2) the customer feedback collection and aggregation into a Seller Service Rating (SSR); and (3) determining how much to charge customers. Because of the technical difficulty in finding analytical solutions that fully reflect the closed-loop interconnections between these processes, we develop a simulation–optimization approach to solve the problem. We present a computational study and report on results of numerical experiments providing interesting insights on how the retailer could startegically align the price he charges with his service quality performance.

Suggested Citation

  • Renato Matta & Timothy J. Lowe, 2023. "Product price alignment with seller service rating and consumer satisfaction," Annals of Operations Research, Springer, vol. 320(2), pages 695-725, January.
    • Handle: RePEc:spr:annopr:v:320:y:2023:i:2:d:10.1007_s10479-021-04318-3
    DOI: 10.1007/s10479-021-04318-3
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