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Counteracting Strategic Consumer Behavior in Dynamic Pricing Systems

In: Consumer-Driven Demand and Operations Management Models

Author

Listed:
  • Yossi Aviv

    (Washington University)

  • Yuri Levin

    (Queen’s University)

  • Mikhail Nediak

    (Queen’s University)

Abstract

Dynamic pricing and revenue management practices are gaining increasing popularity in the retail industry, and have engendered a large body of academic research in recent decades. When applying dynamic pricing systems, retailers must account for the fact that, often, strategic customers may time their purchases in anticipation of future discounts. Such strategic consumer behavior might lead to severe consequences on the retailers’ revenues and profitability. Researchers have explored several approaches for mitigating the adverse impact of this phenomenon, such as rationing capacity, making price and capacity commitments, using internal price-matching policies, and limiting inventory information. In this chapter, we present and discuss some relevant theoretical contributions in the management science literature that help us understand the potential value of the above mitigating strategies.

Suggested Citation

  • Yossi Aviv & Yuri Levin & Mikhail Nediak, 2009. "Counteracting Strategic Consumer Behavior in Dynamic Pricing Systems," International Series in Operations Research & Management Science, in: Christopher S. Tang & Serguei Netessine (ed.), Consumer-Driven Demand and Operations Management Models, edition 1, chapter 0, pages 323-352, Springer.
    • Handle: RePEc:spr:isochp:978-0-387-98026-3_12
    DOI: 10.1007/978-0-387-98026-3_12
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    Citations

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    Cited by:

    1. Tang, Christopher S., 2010. "A review of marketing-operations interface models: From co-existence to coordination and collaboration," International Journal of Production Economics, Elsevier, vol. 125(1), pages 22-40, May.
    2. Mantin, Benny & Gillen, David, 2011. "The hidden information content of price movements," European Journal of Operational Research, Elsevier, vol. 211(2), pages 385-393, June.
    3. Ilan Lobel & Jigar Patel & Gustavo Vulcano & Jiawei Zhang, 2016. "Optimizing Product Launches in the Presence of Strategic Consumers," Management Science, INFORMS, vol. 62(6), pages 1778-1799, June.
    4. Zhang, Ying & Zhang, Juliang, 2017. "Strategic customer behavior with disappointment aversion customers and two alleviation policies," International Journal of Production Economics, Elsevier, vol. 191(C), pages 170-177.
    5. Mantin, Benny & Veldman, Jasper, 2019. "Managing strategic inventories under investment in process improvement," European Journal of Operational Research, Elsevier, vol. 279(3), pages 782-794.
    6. Gökgür, Burak & Karabatı, Selçuk, 2019. "Dynamic and targeted bundle pricing of two independently valued products," European Journal of Operational Research, Elsevier, vol. 279(1), pages 184-198.
    7. Mehmet Sekip Altug & Tolga Aydinliyim, 2016. "Counteracting Strategic Purchase Deferrals: The Impact of Online Retailers’ Return Policy Decisions," Manufacturing & Service Operations Management, INFORMS, vol. 18(3), pages 376-392, July.
    8. Yossi Aviv & Mike Mingcheng Wei & Fuqiang Zhang, 2019. "Responsive Pricing of Fashion Products: The Effects of Demand Learning and Strategic Consumer Behavior," Management Science, INFORMS, vol. 65(7), pages 2982-3000, July.
    9. Bazhanov, Andrei & Levin, Yuri & Nediak, Mikhail, 2015. "Quantity Competition in the Presence of Strategic Consumers," MPRA Paper 62075, University Library of Munich, Germany.
    10. Dror Hermel & Benny Mantin, 2018. "Selling to strategic consumers: on the benefits of consumers’ valuation uncertainty and abundant inventory," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(3), pages 146-165, June.
    11. Nikolay Osadchiy & Gustavo Vulcano, 2010. "Selling with Binding Reservations in the Presence of Strategic Consumers," Management Science, INFORMS, vol. 56(12), pages 2173-2190, December.
    12. Christian Borgs & Ozan Candogan & Jennifer Chayes & Ilan Lobel & Hamid Nazerzadeh, 2014. "Optimal Multiperiod Pricing with Service Guarantees," Management Science, INFORMS, vol. 60(7), pages 1792-1811, July.
    13. Aviv, Yossi & Bazhanov, Andrei & Levin, Yuri & Nediak, Mikhail, 2016. "Quantity Competition under Resale Price Maintenance when Most Favored Customers are Strategic," MPRA Paper 72011, University Library of Munich, Germany.
    14. Huang, Kwei-Long & Kuo, Chia-Wei & Shih, Han-Ju, 2017. "Advance selling with freebies and limited production capacity," Omega, Elsevier, vol. 73(C), pages 18-28.
    15. Jue Wang & Yuri Levin & Mikhail Nediak, 2019. "Selling Passes to Strategic Customers," Operations Research, INFORMS, vol. 68(4), pages 1095-1115, July.
    16. Arcan Nalca & Tamer Boyaci & Saibal Ray, 2013. "Competitive Price-Matching Guarantees: Equilibrium Analysis of the Availability Verification Clause Under Demand Uncertainty," Management Science, INFORMS, vol. 59(4), pages 971-986, April.
    17. Ken Moon & Kostas Bimpikis & Haim Mendelson, 2018. "Randomized Markdowns and Online Monitoring," Management Science, INFORMS, vol. 64(3), pages 1271-1290, March.
    18. Benny Mantin & Eran Rubin, 2016. "Fare Prediction Websites and Transaction Prices: Empirical Evidence from the Airline Industry," Marketing Science, INFORMS, vol. 35(4), pages 640-655, July.
    19. Yan Liu & William L. Cooper, 2015. "Optimal Dynamic Pricing with Patient Customers," Operations Research, INFORMS, vol. 63(6), pages 1307-1319, December.
    20. Dror Hermel & Benny Mantin & Yossi Aviv, 2022. "Can coupons counteract strategic consumer behavior?," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(3), pages 262-273, June.
    21. Du, Jie & Zhang, Juliang & Hua, Guowei, 2015. "Pricing and inventory management in the presence of strategic customers with risk preference and decreasing value," International Journal of Production Economics, Elsevier, vol. 164(C), pages 160-166.
    22. Alex Gershkov & Benny Moldovanu & Philipp Strack, 2018. "Revenue-Maximizing Mechanisms with Strategic Customers and Unknown, Markovian Demand," Management Science, INFORMS, vol. 64(5), pages 2031-2046, May.

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