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  • Past Event.
Jun 6

Dynamic Pricing and Replenishment with Customer Upgrades

Delivery Method: In Person
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Location:

Gerri C. LeBow Hall
722
3220 Market Street
Philadelphia, PA 19104

Registration Option:

General

Registration for this event has passed.

The Department of Decision Sciences invites you to attend Dynamic Pricing and Replenishment with Customer Upgrades Speaker: Oben Ceryan, Ph.D., Assistant Professor in Decision Sciences, Drexel University Friday, June 6th, 2014, 11:30 am - 12:30 p.m. Gerri C. LeBow Hall, Room 722

For more information, please contact Wenjing Shen at wenjings@drexel.edu.

Abstract We study a joint implementation of dynamic pricing and firm-driven customer upgrades as means of price- and availability-based product substitutions to better match demand and constrained supply across substitutable products. Specifically, we consider a multiple period, nested two-stage model where a firm offering partially substitutable and vertically differentiated products first sets prices and the replenishment levels for each product while the demand is still uncertain. After observing the demand, it then decides how many (if any) of the customers to upgrade to a higher quality product. We characterize the structure of the optimal upgrade policy as well as the optimal pricing and replenishment policies. We show that optimal upgrade decisions follow a modified rationing threshold policy, the replenishment decisions follow modified base stock policies, and the pricing decisions can be characterized by regions of list prices, price discounts and price surcharges. Regarding the impact of offering product upgrades to customers on the optimal pricing policy, we find that offering upgrades leads to a selection of dynamic prices that assists in preserving the vertical price differentiation of the products by maintaining a higher price difference between the products.

Biography Oben Ceryan is an Assistant Professor of Decision Sciences at LeBow College of Business, Drexel University. He received his PhD and MS degrees from the University of Michigan, and his undergraduate degree from Bogazici University. His primary research interests include pricing and revenue management, supply chain management, and modeling and control of production systems. Specifically, his recent work studies the interplay between firms’ supply and demand side decisions such as implementations of resource flexibility, dynamic pricing, and customer upgrades. His work has appeared in Manufacturing & Service Operations Management and IIE Transactions (where one of his publications was selected as a Featured Article).

Disciplines

Decision Sciences and MIS
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