Dynamic pricing and revenue management process in Internet retailing under uncertainty: An integrated real options approach
Competition and demand volatility often cause modern enterprises to be confronted by uncertain environments. When a firm manages revenue in such competitive and risky environments, the optimization of pricing and capacity allocation, subject to a fixed time and capacity, becomes a complicated problem. Many previous papers concerning revenue management (RM) and pricing require that the firm possesses the ability to know the demand curve (or demand distribution) and set prices on it to maximize profits. However, this assumption may not be the case in some industries. Therefore, this paper focuses on the dynamic lead indicators rather than assumptive lag indicators to establish a concise and flexible decision model for practical use. This paper provides an integrated real options (IRO) approach with analytic hierarchy process (AHP) for the auction RM problem under competitive/dynamic pricing and revenue uncertainty in Internet retailing. A numerical example is also presented to illustrate that the IRO approach can generate better decisions than the naIÂ¨ve (or risk unawareness) approach in revenue quality of safety and profitability. The new perspective and approach proposed by this paper can be extended to other RM fields whenever both profitability and risk are critical to decision making.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 37 (2009)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yao, Dong-Qing & Liu, John J., 2005. "Competitive pricing of mixed retail and e-tail distribution channels," Omega, Elsevier, vol. 33(3), pages 235-247, June.
- Dye, Chung-Yuan, 2007. "Joint pricing and ordering policy for a deteriorating inventory with partial backlogging," Omega, Elsevier, vol. 35(2), pages 184-189, April.
- Kalyan Raman & Rabikar Chatterjee, 1995. "Optimal Monopolist Pricing Under Demand Uncertainty in Dynamic Markets," Management Science, INFORMS, vol. 41(1), pages 144-162, January.
- Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
- Isabelle Huault & V. Perret & S. Charreire-Petit, 2007. "Management," Post-Print halshs-00337676, HAL.
- Swan, William M., 2002. "Airline demand distributions: passenger revenue management and spill," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 38(3-4), pages 253-263, May.
- Dixit, A., 1988.
"Entry And Exit Decisions Under Uncertainty,"
91, Princeton, Department of Economics - Financial Research Center.
- Clark, Ephraim & Easaw, Joshy Z., 2007. "Optimal access pricing for natural monopoly networks when costs are sunk and revenues are uncertain," European Journal of Operational Research, Elsevier, vol. 178(2), pages 595-602, April.
- Mitra, Subrata, 2007. "Revenue management for remanufactured products," Omega, Elsevier, vol. 35(5), pages 553-562, October.
- Dentskevich, P & Salkin, G, 1991. "Valuation of real projects using option pricing techniques," Omega, Elsevier, vol. 19(4), pages 207-222.
- Bodily, S. E. & Weatherford, L. R., 1995. "Perishable-asset revenue management: Generic and multiple-price yield management with diversion," Omega, Elsevier, vol. 23(2), pages 173-185, April.
- Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 205-228.
- Schniederjans, Marc J. & Garvin, Tim, 1997. "Using the analytic hierarchy process and multi-objective programming for the selection of cost drivers in activity-based costing," European Journal of Operational Research, Elsevier, vol. 100(1), pages 72-80, July.
- Forbes, William, 2006. "The boys in the bubble: Internet entrepreneurs and stock market value," Omega, Elsevier, vol. 34(5), pages 439-447, October.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:37:y:2009:i:2:p:471-481. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.