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Dr. Nicholas Petruzzi, Penn State

Dr. Nicholas Petruzzi, Penn State


Gerri C. LeBow Hall
3220 Market Street
Rm. 722
Philadelphia, PA 19104
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Professor Petruzzi’s research explores the economic implications of uncertainty within the primary focus areas of operations and supply chain management, pricing, and stochastic inventory theory. His work appears in various academic field journals including Operations Research, Management Science, Manufacturing & Service Operations Management, Production and Operations Management, Naval Research Logistics, IIE Transactions, Decision Sciences, European Journal of Operations Research, and International Journal of Production Economics.

Abstract:
We study optimal retail pricing for a stylized distribution channel in which a single product is sold to a market characterized by bargain-hunting consumers, where bargain hunting is a notion that refers to the propensity of some consumers to extract psychological benefit from the purchase of a given item that is posted at a discounted price. In particular, we derive a price and discount dependent retail demand function from first principles by developing a consumer utility function that incorporates both economic and psychological utility effects associated with a posted selling price that is explicitly discounted from a posted list price. Within that context, we analytically explore the retailer’s trade-off between posting a selling price without an accompanied list price and posting a selling price that is coupled with, and explicitly discounted from, a higher list price, and we determine the retailer’s optimal one-point versus two-point pricing strategy accordingly. We then analyze the effects of wholesale pricing, manufacturer suggested retail pricing, and demand uncertainty on the optimal strategy and corresponding split of channel profits.

Who should attend?

Audience

  • Faculty
  • PhD

Disciplines

  • Decision Sciences and MIS