optimal dynamic pricing of inventories with stochastic demand over finite horizons in many industries managers face the problem of selling a given stock of items by a deadline we investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm s objective is to maximize expected revenues examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry which markets space such as seats on airline flights cabins on vacation cruises and rooms in hotels that become worthless if not sold by a specific time we formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp price as a function of the stock level and the length of the horizon for a particular exponential family of demand functions we find the optimal pricing policy in closed form for general demand functions we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity finally we extend our results to the case where demand is compound poisson only a finite number of prices is allowed the demand rate is time varying holding costs are incurred and cash flows are discounted the initial stock is a decision variable and reordering overbooking and random cancellations are allowed

biofuel investment in tanzania omissions in implementation abstract increasing demand for biofuels as a component of climate change mitigation energy security and a fossil fuel alternative attracts investors to developing countries like tanzania ample unused land is critical for first generation biofuels production and an important feature to attract foreign direct investments that can contribute towards agricultural modernization and poverty reduction initiatives despite the economic justifications the existing institutional and infrastructural capacities dictate the impacts of biofuels market penetrations furthermore exogenous factors like global recessionary pressure depressed oil prices below the level at which biofuel production were profitable in 2007 making tanzania s competitiveness and potential benefits questionable this paper investigates the extent that first generation jatropha based biofuels industry development in tanzania observed during fieldwork in kisarawe and bahi may fulfill policy objectives this paper argues that without strong regulatory frameworks for land investment management and rural development biofuel industrialization could further exacerbate poverty and food insecurity in tanzania the paper concludes with policy recommendations for first generation biofuel development while keeping in mind implications of second generation production since the topic is broad and multifaceted a multidisciplinary approach is used that includes political institutional and agricultural economics to analyze and conceptualize biofuel industry development and food security

optimal pricing and composition of multiple bundles a two step approach abstract this paper analyzes the problem facing a firm that must determine the optimal composition and pricing of multiple bundles it supplies to a single market segment it is assumed the firm s competitors does not react in the short run to its decisions and that their bundles prices and characteristics are known it is further assumed that potential consumers of bundles are rational and maximize a random utility function the problem is modeled as a mixed integer non linear program though such programs are normally hard to solve using traditional methods the difficulties are circumvented here by taking advantage of the problem s mathematical structure to develop a novel two phase solution approach two aspects of the solution are particularly worthy of note 1 we demonstrate that the optimal price of a bundle marketed by a firm depends on the composition of all the firm s bundles and not on their prices and on the composition and price of all the competitors bundles in the market and 2 that if the consumer choice behavior is described by a logit model then the firm s bundles should be very similar to each other

comparing systems approaches to innovation and technological change for sustainable and competitive economies an explorative study into conceptual commonalities differences and complementarities this paper makes a distinction between three theoretical frameworks that have been highly influential in the discourse on innovation competitiveness and sustainability sectoral systems of innovation ssi technological innovation systems tis and socio technical systems st systems these frameworks share a common systems approach to innovation but are often positioned as different bodies of literature that correspond to different epistemic communities this paper is explorative and conceptual in nature it presents a systematic comparative review of ssi tis and st systems based on the following analytical dimensions 1 system boundaries 2 actors and networks 3 institutions 4 knowledge 5 dynamics and 6 policy approach in the concluding section commonalities and differences of the three approaches are presented and suggestions for complimentarily are made c 2010 elsevier ltd all rights reserved

transforming the energy sector the evolution of technological systems in renewable energy technology this paper analyses the development and diffusion of technologies that utilize renewable energy sources in germany sweden and the netherlands the analysis enlarges the life cycle model of industry evolution to one where the focus is on the formation and evolution of new technological systems particular focus is on explaining success and failures in shifting from a formative phase into one characterized by positive feedbacks a set of challenges is identified for policy makers attempting to influence the process of transforming the energy sector

the effects of selling packaged goods on inventory decisions in this paper we study within a newsboy type modeling framework the common business practice of retail firms to sell products not only as independent items but also as part of multiproduct packets packaged goods our emphasis is on understanding the effects of such practices on the inventory decisions of the firm we provide insights on the resulting level of suboptimality when inventory decisions are made with demand information only on the independent items and without accounting for the demand substitution structure induced between independent items and packaged goods our stylized model studies an environment with two products that are not direct substitutes for each other sold either independently or as part of a packet that contains one unit of each we provide necessary and sufficient optimality conditions for this model and suggest an efficient numerical search for obtaining the optimal stocking levels an extensive computational study allowed us to provide insights on the nature of the optimal stocking policies the suboptimality of independent newsboy policies the effects of demand correlation among individual products and multiproduct packets and the determining role of induced substitution structure among products during stockout occasions on the profitability of the inventory system

technological capabilities and industrialization abstract this paper reviews the implications for industrial strategy of recent research on technological capabilities at the firm and national levels after exploring the nature and determinants of microlevel technological development a simple framework for explaining the growth of national capabilities is set out based on the interplay of incentives capabilities and institutions each may suffer market failure and so require corrective intervention the experience of some industrializing countries is described to assess the validity of this framework it is concluded that interventions carefully and selectively applied are necessary for industrial success

a simulation based approach to price optimisation of the mixed bundling problem with capacity constraints abstract in this paper we analyse a service provider s mixed bundling problem for services such as sporting events or holiday packages pursuing the objective of maximising total revenue the service provider has to determine static prices for each single product at the beginning of the selling period additionally an optimal package price has to be chosen for the bundle that comprises one unit of each single product because of capacity constraints the availability of products can change over time such that consumers are forced to switch from their preferred subset of products to an alternative following dynamic substitution we propose two mixed integer linear programmes based on reservation prices that appropriately model the consumer choice process to address the bundling problem it becomes evident that the determination of the optimal prices is computationally expensive even for small problem classes therefore we develop metaheuristics using variable neighbourhoods to evaluate their performance we propose the following new approach our extensive computational study is performed using especially generated scenarios for which the optimal product prices are known for this purpose we present a set of conditions for the generation of reservation prices that guarantee the optimality of the predefined prices based on our computational results managerial insights are derived

bundle pricing of inventories with stochastic demand we consider a retailer selling a fixed inventory of two perishable products over a finite horizon assuming poisson arrivals and a bivariate reservation price distribution we determine the optimal product and bundle prices that maximize the expected revenue our results indicate that the performances of mixed bundling pure bundling and unbundled sales strategies heavily depend on the parameters of the demand process and the initial inventory levels bundling appears to be most effective with negatively correlated reservation prices and high starting inventory levels when the starting inventory levels are equal and in excess of average demand most of the benefits of bundling can be achieved through pure bundling however the mixed bundling strategy dominates the other two when the starting inventory levels are not equal we also observe that an incorrect modeling of the reservation prices may lead to significant losses the model is extended to allow for price changes during the selling horizon it is shown that offering price bundles mid season may be more effective than changing individual product prices

joint pricing and procurement of fashion products in the existence of clearance markets abstract this paper focuses on the joint pricing and procurement of fashion products in the existence of clearance markets it is assumed that the expected regular season demand is a linear decreasing function of the price and the end of period excess inventory is sold at a known discounted price in a clearance market where the demand is a random variable that follows a general distribution it is shown that the expected profit function is unimodal and the optimal procurement quantity and price can be found from the first order conditions existence of a clearance market increases the profit price and the procurement quantity in order to prove this the optimal procurement and pricing policy of a price setting retailer who does not have a clearance market is provided as opposed to the literature it is shown that the expected profit function of this problem is unimodal as well a numerical study demonstrating the magnitude of the increase in profit procurement quantity and price is reported

comments on gaussian demand and commodity bundling different commodities are often sold together as a bundle e g complete dinners in a restaurant stereo systems in mixed bundling strategies the individual components of the bundle are also offered for sale separately in block booking or pure bundling strategies they are not via simple hypothetical examples of two product firms stigler 1963 and adams and yellen 1976 have demonstrated that these selling practices can increase profit even if there is no cost advantage to bundling and the component products are independent in demand it is obvious from these examples that heterogeneity in consumer tastes especially in relative valuations of the firm s two products is a necessary condition for profitable bundling unfortunately more specific principles to describe concisely the necessary and or sufficient conditions for profitable bundling are not so obvious since consumer demand in the examples is represented by a complete enumeration of consumer reservation prices optimal prices and pricing strategies must be determined by trial and error marginal analysis is inappropriate or uninformative more important these numerical examples do not yield characterizations of profit for each strategy as functions of a small number of parameters that summarize the relevant features of the distribution of reservation prices in the consumer population by assuming that reservation prices for the firm s two products are distributed in the consumer population according to the bivariate normal probability law schmalensee in this issue has constructed a class of examples within which the profitability of bundling can be analyzed as a function of production costs the mean and variance of the reservation price for each commodity and the correlation between the two commodities reservation prices although this analysis is sometimes mathematically complex schmalensee is quite thorough subject to the normality assumption many of the questions suggested by the

optimal policies of yield management with multiple predetermined prices it is a common practice for industries to price the same products at different levels for example airlines charge various fares for a common pool of seats seasonal products are sold at full or discount prices during different phases of the season this article presents a model that reflects this yield management problem the model assumes that 1 products are offered at multiple predetermined prices over time 2 demand is price sensitive and obeys the poisson process and 3 price is allowed to change monotonically i e either the markup or markdown policy is implemented to maximize the expected revenue management needs to determine the optimal times to switch between prices based on the remaining season and inventory major results in this research include 1 an exact solution for the continuous time model 2 piecewise concavity of the value function with respect to time and inventory and 3 monotonicity of the optimal policy the implementation of optimal policies is fairly facile because of the existence of threshold points embedded in the value function the value function and time thresholds can be solved with a reasonable computation effort numerical examples are provided

skill complexity and strategic interaction abstract we present a win loss game between players with explicitly modeled cognitive limitations differences in the players abilities to analyze the available moves induce preferences over the complexity of the environment and hence incentives to manipulate that complexity other things equal higher skill players are more likely to win in a class of long horizon games with constant complexity greater complexity reduces the advantage of the higher skill player when the higher skill player is the last mover when the lower skill player moves last increasing complexity induces countervailing effects either of which may dominate finally when complexity can be manipulated over the course of the game the benefits of strategic manipulation of complexity can override objective considerations about best move choice resulting in purposeful departures from subgame perfect nash equilibrium behavior

augmenting conjoint analysis to estimate consumer reservation price consumer reservation price is a key concept in marketing and economics theoretically this concept has been instrumental in studying consumer purchase decisions competitive pricing strategies and welfare economics managerially knowledge of consumer reservation prices is critical for implementing many pricing tactics such as bundling tar get promotions nonlinear pricing and one to one pricing and for assessing the impact of marketing strategy on demand despite the practical and theoretical importance of this concept its measurement at the individual level in a practical setting proves elusive we propose a conjoint based approach to estimate consumer level reservation prices this approach integrates the preference estimation of traditional conjoint with the economic theory of consumer choice this integration augments the capability of traditional conjoint such that consumers reservation prices for a product can be derived directly from the individuallevel estimates of conjoint coefficients with this augmentation we can model a consumer s decision of not only which product to buy but also whether to buy at all in a category thus we can simulate simultaneously three effects that a change in price or the introduction of a new product may generate in a market the customer switching effect the cannibalization effect and the market expansion effect we show in a pilot application how this approach can aid product and pricing decisions we also demonstrate the predictive validity of our approach using data from a commercial study of automobile batteries

information processing and bounded rationality a survey this paper surveys recent attempts to formulate a plausible and tractable model of bounded rationality the author focuses in particular on models that view bounded rationality as stemming from limited information processing he discusses partitional models such as computability automata perceptions and optimal networks nonpartitional models and axiomatic approaches

pre season stocking and pricing decisions for fashion retailers with multiple information updating abstract motivated by the industrial practice we investigate in this paper the pre season inventory and pricing decisions for fashion retailers before the selling season a retailer can place orders for a seasonal fashion product from her supplier at two distinct stages via two different delivery modes market information from the sales of a pre seasonal product is collected and used to update the demand forecast of the seasonal product at the succeeding stages by using bayesian approach we formulate a dynamic optimization problem and obtain the optimal stocking policy after the ordered seasonal product has arrived and just before the start of the selling season the retailer can determine the optimal selling price of the product with respect to the latest demand information and the amount of product on hand we study the pricing policy under different objectives sensitivity analysis is carried out and the features of the policies are revealed managerial insights are generated

perishable asset revenue management with markovian time dependent demand intensities many industries face the problem of selling a fixed stock of items over a finite horizon these industries include airlines selling seats before planes depart hotels renting rooms before midnight theaters selling seats before curtain time and retailers selling seasonal items with long procurement lead times given a sunk investment in seats rooms or winter coats the objective for these industries is to maximize revenues in excess of salvage value when demand is price sensitive and stochastic pricing is an effective tool to maximize expected revenues in this paper we address the problem of deciding the optimal timing of price changes within a given menu of allowable possibly time dependent price paths each of which is associated with a general poisson process with markovian time dependent predictable intensities we show that a set of variational inequalities characterize the value functions and the optimal possibly random time changes in addition we develop an efficient algorithm to compute the optimal value functions and the optimal pricing policy

skill complexity and strategic behavior abstract boundedly rational players with differing skill are affected differently by complexity thus players have preferences for complexity that depend on their own skill and the skill of their opponents such preferences are likely to be important determinants of players choices to illustrate this paper analyzes a model where differently skilled players sort themselves across two person win draw loss games of differing complexity are randomly paired against opponents who have made similar choices and then play the games they have chosen

a perspective on multinational enterprises and climate change learning from an inconvenient truth this paper explores whether and how an important environmental issue such as climate change can not only give multinational enterprises the opportunity to develop green firm specific advantages fsas but also help reconfigure key fsas that are viewed as the main sources of firms profitability growth and survival we examine the nature and geography of such fsa development and develop two organizing frameworks which are subsequently applied to climate change using information from global 500 firms implications and future directions for international business research are indicated

biofuel development in ghana policies of expansion and drivers of failure in the jatropha sector abstract biofuel development was mainly promoted in several parts of africa as an energy security or rural development strategy jatropha was the biofuel feedstock that received the most interest across africa from investors however jatropha expansion gave rise to a number of contested issues which produced conflicts winners and losers access to land was at the heart of several of these conflicts though some success stories of individual jatropha projects have been documented the overwhelming majority of these projects in africa have either collapsed or faced significant difficulties understanding the reasons behind the failure of the jatropha sector is an important gap in the academic literature while the lessons learnt from failed projects could inform future policies and practices this literature review synthesizes the key drivers of failure of the jatropha sector in ghana as identified in the literature and complemented through site visits and expert interviews it identifies a number of reasons behind the failure of individual jatropha projects such as poor business planning institutional barriers limited community participation unfair compensation practices obstacles posed by civil society and unconstructive involvement of chiefs the findings indicate the systemic nature of these problems as they often worked synergistically to catalyse the collapse of many jatropha projects in ghana re vitalising the biofuel and especially the jatropha industry is virtually impossible given the current challenges this would require a renewed political interest in ghana particularly to deal with the deficits of the land administration institutions

optimal bundling and pricing under a monopoly contrasting complements and substitutes from independently valued products we develop an analytical model of contingent valuations and address two questions of import to a monopolist i should a given pair of complements or substitutes be sold separately pure components together pure bundling or both mixed bundling and at what prices ii how do optimal bundling and pricing strategies for complements and substitutes differ from those for independently valued products we find that the combination of marginal cost levels and the degree of complementarity or substitutability determines which of the three bundling strategies is optimal complements and substitutes should typically be priced higher than independently valued products

a classification of the literature on the planning of substitutable products abstract a company s assortment of products and corresponding inventory levels are constrained by available resources such as production capacity storage space and capital to acquire the inventory thus customers may not always be able to find a most preferred product at the time of purchase this unsatisfied demand is often substituted with an alternative in the extant literature there have been an increasing number of studies that consider product substitution when planning product assortment inventory and capacity in conjunction with pricing in this paper we classify the literature on the planning of substitutable products published in the major om and marketing journals during the past thirty years 1974 2013 and present a comprehensive taxonomy of the literature one criterion is adopted to discuss modeling objectives and three major criteria are provided to define the nature of product substitution including substitution mechanism substitution decision maker and direction of substitutability we also identify research gaps to provide guidance for related research in the future

gaussian demand and commodity bundling in an important and widely cited essay adams and yellen 1976 examine the use of package selling as a price discrimination device they consider a monopolist producing two goods with constant unit costs and facing buyers with diverse tastes the marginal utility of a second unit of either good is assumed to be zero for all buyers the two goods are independent in demand for all buyers so that any buyer s reservation price for the first unit of either good is independent of the market price of the other thus the maximum amount any buyer would pay for a bundle consisting of one unit of each good is the sum of the two reservation prices and buyers are completely described by the values of those two prices 2 resale markets are assumed away in order to obtain comparative results for alternative pricing strategies the distribution of reservation prices in the adams yellen framework is assumed to be bivariate normal implications of gaussian demand are explored pure bundling is shown to operate by reducing buyer diversity thus facilitating the capture of consumers surplus it generally makes buyers worse off than unbundled sales it is more profitable if average reservation prices are high enough mixed bundling combines advantages of both pure bundling and unbundled sales and it is generally strictly more profitable than either bundling which treats goods symmetrically seems most attractive under symmetric reservation price distributions i am indebted to severin borenstein for superb research assistance to the ford motor company for research support through a grant to m i t and to the harvard economics department for housing me as a visiting scholar while most of this research was performed of course only i can be held responsible for this essay s shortcomings 1 the first clear recognition of this possibility seems to have been by stigler 1968 but also see burstein 1960 2 paroush and peles 1981 relax the assumption that consumers purchase at most one unit of each good but they consider only two types of buyers both with linear demand functions they retain the assumption that demands are independent for all buyers telser 1979 and phillips 1981 use different frameworks to analyze bundling policies spence 1980 explores the relation between bundling across commodities as here and bundling multiple units of the same

industrial pricing theory and managerial practice we organize the existing theoretical pricing research into a new two level framework for industrial goods pricing the first level consists of four pricing situations new product competitive product line and cost based the second level consists of the pricing strategies appropriate for a given situation for example within the new product pricing situation there are three alternative pricing strategies skim penetration and experience curve pricing there are a total of ten pricing strategies included in the framework we then identified a set of cost product market and information conditions which determine what pricing situation s a firm is facing as well as which strategies are appropriate within a given situation some of these determinant conditions are common to many pricing strategies e g highly elastic demand while others are unique to a given strategy within a particular pricing situation for example within the product line situation the profitability of supplementary sales is a unique determinant of the complementary product pricing strategy razor and blade pricing using this framework as a basis for an empirical study we examined how well current industrial pricing practice matches the prescriptions from the existing research our sample consisted of 270 respondents 27 response rate of these more than 50 indicated that they used more than one pricing strategy in formulating their most recent pricing decision for a high value industrial product sold in the united states as in previous research cost plus pricing was the most often cited pricing strategy 56 of the respondents since the respondents were able to indicate their use of more than one pricing strategy the data are of the pick k from n variety in order to model the managers pricing strategy choices we constructed a stacked binary logit with a separate observation for each strategy within a given pricing situation the signs of the determinant variables were estimated as interaction terms the new product pricing strategies skim penetration experience curve were used for new models in the market skim pricing was used in markets with high levels of product differentiation by firms at a cost disadvantage due to scale penetration pricing was used by firms with a cost advantage due to scale in markets with high level of overall elasticity but low brand elasticity experience curve pricing was used for minor innovations by firms with low capacity utilization in markets with a high level of differentiation the competitive pricing strategies leader parity and low price supplier were used in mature markets parity pricing was used by firms in a poor competitive situation i e high costs low market share low product differentiation these firms were also unable to take advantage of high levels of elasticity since their capacity utilization was high in contrast the low price supplier strategy was used by firmswith low costs due to scale advantages since they have low utilization these firms can take advantage of elastic brand demand none of the determinants were significantly related to the choice of leader pricing product line pricing strategies bundling complementary product and customer value pricing were more likely to be used by firms which sell substitute or complementary products bundle pricing was used for per sale contract pricing in markets with high levels of brand elasticity complementary product pricing razor and blade was used by firms that enjoyed high profitability on its supplementary sales using customer value pricing a firm offers a stripped down version of its current products to appeal to more price sensitive segments or to leverage new distribution channels this strategy was used to target a narrow segment in high growth markets where price changes are difficult to detect cost based pricing was more likely to be used in marketswhere demand is very difficult to estimate in such a situation cost based pricing makes a great deal of sense in general the results show that the managers pricing strategy choices are consistent with normative pricing research however questions about how managers combine their strategies to arrive at a final price as well as the organizational influences on pricing strategies remain important areas for future research

revenue management through dynamic cross selling in e commerce retailing we consider the problem of dynamically cross selling products e g books or services e g travel reservations in the e commerce setting in particular we look at a company that faces a stream of stochastic customer arrivals and may offer each customer a choice between the requested product and a package containing the requested product as well as another product what we call a packaging complement given consumer preferences and product inventories we analyze two issues 1 how to select packaging complements and 2 how to price product packages to maximize profits we formulate the cross selling problem as a stochastic dynamic program blended with combinatorial optimization we demonstrate the state dependent and dynamic nature of the optimal package selection problem and derive the structural properties of the dynamic pricing problem in particular we focus on two practical business settings with the emergency replenishment model and without the lost sales model the possibility of inventory replenishment in the case of a product stockout for the emergency replenishment model we establish that the problem is separable in the initial inventory of all products and hence the dimensionality of the dynamic program can be significantly reduced for both models we suggest several packaging pricing heuristics and test their effectiveness numerically

prospects for jatropha biofuels in tanzania an analysis with strategic niche management the paper reports on research in tanzania about the scope for developing biofuels from an oil seed bearing plant called jatropha curcas linnaeus the plant is widely seen to have potential to help combat the greenhouse effect help to stop local soil erosion create additional income for the rural poor and provide a major source of energy both locally and internationally the principal analytic tool is strategic niche management snm an approach rooted in evolutionary innovation theory we analyse how the scope for an energy transition is influenced by factors at three societal levels the overarching landscape the sectoral setting or regime and the niche level where the innovation develops and diffuses valuable niche processes were found in a few areas especially in cultivation but we conclude that there are still many obstacles in tanzania s prevailing energy regime the development of jatropha biofuels is still in an early phase we list policy recommendations and discuss some methodological issues arising from the use of snm

combined pricing and inventory control under uncertainty this paper addresses the simultaneous determination of pricing and inventory replenishment strategies in the face of demand uncertainty more specifically we analyze the following single item periodic review model demands in consecutive periods are independent but their distributions depend on the item s price in accordance with general stochastic demand functions the price charged in any given period can be specified dynamically as a function of the state of the system a replenishment order may be placed at the beginning of some or all of the periods stockouts are fully backlogged we address both finite and infinite horizon models with the objective of maximizing total expected discounted profit or its time average value assuming that prices can either be adjusted arbitrarily upward or downward or that they can only be decreased we characterize the structure of an optimal combined pricing and inventory strategy for all of the above types of models we also develop an efficient value iteration method to compute these optimal strategies finally we report on an extensive numerical study that characterizes various qualitative properties of the optimal strategies and corresponding optimal profit values

a strategic motivation for commodity bundling the analytical literature on commodity bundling explains the practice of selling two or more differentiated products in a single package as a surrogate for direct price discrimination in contrast this paper shows that imperfect competition creates a strategic incentive to bundle the profitability of bundling whether it adversely affects rival producers and whether it yields an overall efficiency gain depends inter alia on the nature of product market competition the role of complementarity in explaining why firms bundle is also explored copyright 1990 by blackwell publishing ltd

world bank gef solar home systems projects experiences and lessons learned 1993 2000 abstract twelve projects provide energy services to off grid rural households in developing countries by enhancing markets for solar home systems and by removing barriers to their dissemination project approaches are reviewed along with early implementation experience and lessons suggested by experience most projects incorporate the following features pilot private sector and ngo delivery models pilot consumer credit delivery mechanisms pay first cost subsidies and offer affordable system sizes support policy development and capacity develop codes and standards and establish certification testing and enforcement institutions and conduct consumer awareness and marketing programs most projects are just beginning implementation a few are almost completed lessons from early experience suggest that solar home system delivery firms face a myriad of difficulties operating in rural areas credit risk is a serious concern of both financiers and dealers and makes credit sales particularly challenging technical performance of systems is becoming well proven customers desire a range of component options and service levels and can benefit from even small systems projects must recognize the link between rural electric grid extension and solar home system demand and marketing campaigns can be extremely costly and time consuming in rural areas challenges are to demonstrate sustainable and replicable business models develop regulatory models for energy service concessions and integrate rural electrification policy with solar home system delivery

dynamic and targeted bundle pricing of two independently valued products abstract bundling is when two or more products are offered as a single unit and at a price lower than the sum of the individual prices of the products we study a multi segment market in which a retailer aims to clear the inventory of an item by bundling it with a second product which is independently valued we investigate the question of how dynamic and segment specific bundle pricing impacts retailer s revenue we develop a revenue model that integrates the dynamic and segment specific aspects of the pricing decisions and present a computational study to analyze their revenue impact relative to a price promotion for the individual item only the computational results indicate that the bundle offers are most effective when the initial inventory of the item under consideration is high the results also demonstrate that dynamic pricing is beneficial when the initial inventory of the item is low an additional revenue improvement is observed when the price of the bundle is dynamically optimized in the computational study segment specific pricing is observed to have no direct impact on revenue when prices are static segment specific and dynamic pricing however can bring about substantial revenue improvements that are an increasing function of the initial inventory level of the item we consider the correlation in consumers valuations of the bundled products and show that dynamically priced and segment specific bundle offers yield a robust revenue performance mitigating the potentially revenue diminishing impact of positive correlation in consumers valuations of the products

periodic pricing of seasonal products in retailing this paper studies intertemporal pricing policies when selling seasonal products in retail stores we first present a continuous time model where a seller faces a stochastic arrival of customers with different valuations of the product for this model we characterize the optimal pricing policies as functions of time and inventory we use this model as a benchmark against which we compare more realistic models that consider periodic pricing reviews we show that the structure of the optimal pricing policies in this case is consistent with the procedures observed in practice retail stores successively discount the product during the season and promote a liquidation sale at the end of the planning horizon we also show that the loss experienced when implementing periodic pricing reviews instead of continuous policies is small when the appropriate number of reviews is chosen several interesting economic insights emerge from our analysis for example uncertainty in the demand for new products leads to higher prices larger discounts and more unsold inventory finally we study the effect of announced discount policies on prices and profits we show that stores that have adopted this type of strategy usually set prices such that with high probability the merchandise is sold during the first periods and the largest discounts rarely take place

optimal bundle formation and pricing of two products with limited stock abstract in this study we consider the stochastic modeling of a retail firm that sells two types of perishable products in a single period not only as independent items but also as a bundle our emphasis is on understanding the bundling practices on the inventory and pricing decisions of the firm one of the issues we address is to decide on the number of bundles to be formed from the initial product inventory levels and the price of the bundle to maximize the expected profit product demands follow a poisson process with a price dependent rate customer reservation prices are assumed to have a joint distribution we study the impact of reservation price distributions initial inventory levels product prices demand arrival rates and cost of bundling we observe that the expected profit decreases as the correlation between the reservation prices of two products increases with negative correlation bundling cost has a significant impact on the number of bundles formed when the product prices are low the retailer sells individual products as well as the bundle mixed bundling when they are high the retailer sells only bundles pure bundling the expected profit and the number of bundles offered decrease as the variance of the reservation price distribution increases for high starting inventory levels the retailer reduces bundle price and offers more bundles the number of bundle sales decreases and the number of individual product sales increases when the arrival rate increases since the need for bundling decreases impacts of substitutability and complementarity of products are also investigated the retailer forms more bundles or charges higher prices for the bundle or both as the products become more complementary and less substitutable

a taxonomy and research overview of perishable asset revenue management yield management overbooking and pricing this paper proposes the term perishable asset revenue management to denote the field that combines the areas of yield management overbooking and pricing for perishable assets after summarizing the characteristics common to problems in this field the paper discusses the objectives and constraints faced by decision makers then it offers a comprehensive taxonomy with 14 different elements and reviews the research that has been done related to each element finally it suggests some important areas of future research that can help bridge the gap between theory and application

a graphical analysis of bundling by comparing the demand for a bundle and the vertical sum of the demands for its components this article analyzes the profitability and welfare consequences of bundling if it does not lower costs bundling tends to be profitable when reservation values are negatively correlated and high relative to costs if bundling lowers costs and costs are high relative to average reservation values positively correlated reservation values increase the incentive to bundle bundling and charging a price equal to the sum of the components prices lowers consumer surplus bundling can however increase consumer surplus when it results in lower prices copyright 1995 by university of chicago press

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

a multiproduct dynamic pricing problem and its applications to network yield management a firm has inventories of a set of components that are used to produce a set of products there is a finite horizon over which the firm can sell its products demand for each product is a stochastic point process with an intensity that is a function of the vector of prices for the products and the time at which these prices are offered the problem is to price the finished products so as to maximize total expected revenue over the finite sales horizon an upper bound on the optimal expected revenue is established by analyzing a deterministic version of the problem the solution to the deterministic problem suggests two heuristics for the stochastic problem that are shown to be asymptotically optimal as the expected sales volume tends to infinity several applications of the model to network yield management are given numerical examples illustrate both the range of problems that can be modeled under this framework and the effectiveness of the proposed heuristics the results provide several fundamental insights into the performance of yield management systems

dynamic pricing in the presence of inventory considerations research overview current practices and future directions the benefits of dynamic pricing methods have long been known in industries such as airlines hotels and electric utilities where the capacity is fixed in the short term and perishable in recent years there has been an increasing adoption of dynamic pricing policies in retail and other industries where the sellers have the ability to store inventory three factors contributed to this phenomenon 1 the increased availability of demand data 2 the ease of changing prices due to new technologies and 3 the availability of decision support tools for analyzing demand data and for dynamic pricing this paper constitutes a review of the literature and current practices in dynamic pricing given its applicability in most markets and its increasing adoption in practice our focus is on dynamic intertemporal pricing in the presence of inventory considerations

comments on gaussian demand and commodity bundling richard schmalensee s paper deals with commodity bundling that is the selling of goods or services in packages the paper is particularly interesting to those who study and or manage the marketing function indeed selling of goods or services in packages is a very common marketing strategy examples include vacation packages season tickets concerts sports theater etc and complete dinners there are two forms of bundling strategies pure bundling if goods are sold only in packages and mixed bundling if goods are sold separately as well as in packages e g ordering a la carte vs a whole dinner bundles sometimes include goods or services that cannot be sold separately luxury in a car is tied to transportation services a brand name cannot be sold alone see adams and yellen 1976 these authors also mention that selling different sizes is a form of commodity bundling if two sizes of a product are sold a small size s and a large size s the offering s s is a form of mixed commodity bundling the quantity s s is not offered separately but only as part of the bundle s in the past the explanation of commodity bundling focused on cost savings in production transactions or complementarity of bundle components stigler 1963 first articulated the idea that the profitability of commodity bundling can stem from its ability to sort customers into groups with different reservation price characteristics and hence to extract consumer surplus adams and yellen 1976 discussed this sorting of consumers figure 1 describes the case of selling each good independently any individual with reservation prices rl r2 for the two goods falls into one of four regions 0 are nonbuyers r1 pi r2 pi p2 finally mixed bundling is shown in figure 3 region 1 individuals buy 1 only because r pi but r2 pb

the jatropha biofuels sector in tanzania 2005 9 evolution towards sustainability abstract biofuel production has recently attracted much attention some anticipate substantial social and environmental benefits while at the same time expecting sound profitability for investors others are doubtful envisaging large trade offs between the pursuit of social environmental and economic objectives particularly in poor countries in the tropics the paper explores these issues in tanzania which has been an african forerunner in the cultivation of a bio oil shrub called jatropha curcas l we trace how isolated jatropha biofuel experiments developed since early 2005 towards a sectoral production and innovation system and we investigate to what extent that system has been capable of developing and maintaining sustainable practices and producing sustainable outcomes the application of evolutionary innovation theory allows us to view the developments in the sector as a result of evolutionary variation and selection on the one hand and revolutionary contestation between different coalitions of stakeholders on the other both these processes constitute significant engines of change while variation and selection are driven predominantly by localised technical and agronomic learning the conflict driven dynamics are highly globalised and occur primarily as a result of reflexive learning about problematic sustainability impacts the sector is found to have moved some way towards a full sectoral innovation and production system but it is impossible to predict whether a viable sector with a strong triple bottom line orientation will ultimate emerge since many issues surrounding the social environmental and financial sustainability still remain unresolved especially relating to local and global governance

dynamic pricing and ordering decisions by a monopolist this paper considers the relationship between pricing and ordering decisions for a monopolistic retailer facing a known demand function where over the inventory cycle the product may exhibit i physical decay or deterioration of inventory called wastage and ii decrease in market value called value drop associated with each unit of inventory on hand the retailer is allowed to continuously vary the selling price of the product over the cycle we introduce a notion of instantaneous margin and use it to derive profit maximizing conditions for the retailer the model explains the markdown of retail goods subject to decay it also provides guidance in determining when price changes during the cycle are worthwhile due to product aging how often such changes should be made and how such changes affect ordering intervals and quantities