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TECHNICAL NOTE---Revenue Management with Bargaining

Author

Listed:
  • Atul Bhandari

    (SmartOps, Pittsburgh, Pennsylvania 15212)

  • Nicola Secomandi

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

Static game-theoretic models of bilateral bargaining assume that the seller knows his valuation for the item that is up for sale; that is, how the seller may determine this quantity is exogenous to these models. In this paper, we develop and analyze a stylized Markov decision process that endogenizes the seller's computation of his marginal inventory valuation in an infinite-horizon revenue management setting when each sale occurs according to a given bilateral bargaining mechanism. We use this model to compare, both analytically and numerically, the seller's performance under four basic bilateral bargaining mechanisms with a tractable information structure. These comparisons provide insights into the seller's performance under the following trading arrangements: buyer and seller posted pricing, negotiated pricing, and rule-based pricing.

Suggested Citation

  • Atul Bhandari & Nicola Secomandi, 2011. "TECHNICAL NOTE---Revenue Management with Bargaining," Operations Research, INFORMS, vol. 59(2), pages 498-506, April.
    • Handle: RePEc:inm:oropre:v:59:y:2011:i:2:p:498-506
    DOI: 10.1287/opre.1100.0895
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    References listed on IDEAS

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    Cited by:

    1. Qi Feng & Yuanchen Li & J. George Shanthikumar, 2020. "Competitive Revenue Management with Sequential Bargaining," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1307-1324, May.
    2. Andrew M. Davis & Bin Hu & Kyle Hyndman & Anyan Qi, 2022. "Procurement for Assembly Under Asymmetric Information: Theory and Evidence," Management Science, INFORMS, vol. 68(4), pages 2694-2713, April.
    3. Qi Feng & J. George Shanthikumar, 2018. "Posted Pricing vs. Bargaining in Sequential Selling Process," Operations Research, INFORMS, vol. 66(1), pages 92-103, 1-2.

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