DocumentCode :
727669
Title :
A revenue management pricing model with reference effects
Author :
Xiaoyue Chen ; Chen Zhang ; Hui Yang ; Hui Jin
Author_Institution :
Sch. of Econ. & Manage., Nanjing Univ. of Sci. & Technol., Nanjing, China
fYear :
2015
fDate :
22-24 June 2015
Firstpage :
1
Lastpage :
6
Abstract :
Considering customers´ bounded-rationality purchasing behavior, this paper focuses on dynamic pricing decision with a static reference price in revenue management situations. Firstly, it defines the concept of multiplicative reference effect, and describes the characteristics of the reference effect and the demand function with multiplicative reference effect. Secondly, it constructs the optimal control model with continuous time and continuous prices. By solving the Hamilton- Jacobi equation, it presents the optimal price paths. Finally, it compares the pricing strategies with the GVR model without reference effect under different circumstances through simulation experiments. The results show that the stronger the reference effect is, the more it influences the optimal prices and total revenue. The optimal prices and revenue increase with the reference price. The markup policy is effective in high demand situations and the markdown policy is effective in low demand situations. In the situations with low demand and strong reference effect, the enterprises should adopt demand-oriented strategies. In other situations, they should adopt price-oriented strategies.
Keywords :
consumer behaviour; optimal control; pricing; purchasing; Hamilton-Jacobi equation; customer bounded-rationality purchasing behavior; demand-oriented strategies; dynamic pricing decision; markdown policy; markup policy; multiplicative reference effect; optimal control model; price-oriented strategies; revenue management pricing model; static reference price; Atmospheric modeling; Benchmark testing; Mathematical model; Numerical models; Optimal control; Pricing; Stochastic processes; dynamic pricing; optimal control model; reference effect; revenue management; simulation;
fLanguage :
English
Publisher :
ieee
Conference_Titel :
Service Systems and Service Management (ICSSSM), 2015 12th International Conference on
Conference_Location :
Guangzhou
Print_ISBN :
978-1-4799-8327-8
Type :
conf
DOI :
10.1109/ICSSSM.2015.7170215
Filename :
7170215
Link To Document :
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