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

analysis of seat allocation and overbooking decisions with hybrid information abstract we investigate a single leg airline revenue management problem where an airline has limited demand information and uncensored no show information to use such hybrid information for simultaneous overbooking and booking control decisions we combine expected overbooking cost with revenue then we take a robust optimization approach with a regret based criterion while the criterion is defined on a myriad of possible demand scenarios we show that only a small number of them are necessary to compute the objective we also prove that nested booking control policies are optimal among all deterministic ones we further develop an effective computational method to find the optimal policy and compare our policy to others proposed in the literature

rational bidding in a procurement auction with subjective evaluations in practice procurement auctions often involve subjective evaluations of bids especially when consisting of quality or design parameters which are hard to quantify we formally define a notion of subjectivity in an auction environment and analyze the implications for rational bidding behavior our findings explain some observed bidding behaviors that are inconsistent with standard equilibrium predictions finally we examine the way subjectivity facilitates the practice of favoritism on part of the auctioneer

market structure and the value of overselling under stochastic demands in the operations management literature traditional revenue management focused on pricing and capacity allocation strategies in a two period model with stochastic demand inspired by travel and lodging industries we examine a two period model in which each seller may also adopt the overselling strategy to customers whose valuations are differentiated by timing of arrivals widely seen as a popular hedge against consumers skipping reservations we extend the stylized approaches of biyalogorsky carmon fruchter and gerstner 1999 and lim 2009 to understand the value of overselling under various market structures we find that contrary to existing literature the impact of period two pricing competition from overselling spills over to period one such that overselling may not always be a weakly dominant strategy once unlimited early demand ceases to hold in a duopoly regime we provide some numerical studies on the existence of multiple equilibria at the capacity allocation level which actually lead to different selling strategies at the equilibrium despite identical market conditions and firm characteristics

on the optimal pricing policy of a monopolist the paper presents a simple explanation of price dispersion by a monopolist assuming only that consumers arrive in a random order and are served on a first come first served basis a firm can sometimes increase its profits by charging two different prices for the same good and rationing sales at the lower price however it is never necessary to charge more than two prices and a single price is sufficient as long as either the marginal revenue curve is everywhere downward sloping or the marginal cost of production is constant

procurement with specialized firms we analyze optimal procurement mechanisms when firms are specialized the procurement agency has incomplete information concerning the firms cost functions and values high quality as well as low price lower type firms are cheaper more expensive than higher type firms when providing low high quality with specialized firms distortion is limited and a mass of types earns zero profits the optimal mechanism can be inefficient types providing lower second best welfare win against types providing higher second best welfare as standard scoring rule auctions cannot always implement the optimal mechanism we introduce a new auction format implementing the optimal mechanism

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

on the analysis of asymmetric first price auctions we provide a new set of tools for studying asymmetric rst price auctions connecting their equilibria to the concavity of the underlying type distributions and showing how one can use surplus expressions related to symmetric auctions to bound equilibrium behavior in asymmetric auctions we apply these tools to studying procurement auctions in which as is common in practice one seller is given an advantage re ecting for example better reliability or quality we show conditions under which for any given rst price handicap auction there is a second price auction with bonuses that outperforms it with most of our results involving ex post dominance

some two echelon supply chain games improving from deterministic symmetric information to stochastic asymmetric information models abstract many supply chain and inventory models use the following two echelon symmetric information and deterministic gaming structure a manufacturer wholesales a product to a retailer who in turn retails it to the consumer the retail market demand varies with the retail price according to a deterministic demand function that is known to both the manufacturer and the retailer it is then assumed that the players the manufacturer and the retailer arrive at their pricing and batch size decisions through a stackelberg game or a fixed markup percentage game the first part of this paper reveals many implausible effects of demand curve forms on the behavior of these gaming models however we do not merely conclude that two echelon gaming results obtained via assuming one convenient demand curve form can often become invalid under other demand curve forms more importantly we argue in the second part of the paper that the various implausible effects revealed here suggest a different but more fundamental conclusion the assumed non cooperative games are themselves flawed because gaming is meaningless and logically circular in a deterministic and symmetrical information system we then present an introductory illustration on how the introduction of stochasticity and information a symmetry leads to more plausible two echelon supply chain gaming models together the two parts demonstrate the necessity and practicality of using a stochastic and asymmetric information instead of the prevalent deterministic symmetric information approach in many supply chain models

using yield management to shift demand when the peak time is unknown traditional peak load and stochastic peak load models assume firms have prior information about when peak demand occurs however price dispersion such as is typically used by firms practicing yield management can achieve some of the same efficient demand shifting even when the peak time is unknown equilibrium price dispersion arises because of stochastic demand and price rigidities but a previously unexplored benefit of price dispersion is its ability to reduce equilibrium capacity costs through demand shifting the model also suggests how yield management now more commonly called revenue management might actually benefit business travellers contrary to the popular prejudice

on the suboptimality of s 1 s lost sales inventory policies abstract this paper considers replenishment policies for the continuous review inventory model with poisson demand a fixed lead time on replenishment and lost sales during a stockout there is a time dependent stockholding cost and a cost per unit of sale lost but there is no or negligible cost associated with placing a replenishment order the standard policy is to specify a maximum stock level s and place a replenishment order whenever a demand occurs and is met this is commonly referred to as an s 1 s policy it is shown that there are other replenishment policies which give lower cost solutions in fact it is demonstrated that an s 1 s policy can never be optimal if s 2

optimal production purchasing and pricing a differential game approach abstract this paper deals with a problem of determining optimal production and pricing policies of a manufacturing firm which is supplying a retailer the latter faces a price dependent demand function towards the final consumers and wishes to determine optimal purchasing and pricing policies both firms carry inventories and backlogging is permitted the problem is modelled as a two player nonzero sum differential game with the inventory levels as the state variables the controls are the rates of production and purchasing as well as the prices assuming linear production costs but convex ordering and holding costs open loop nash controls are characterized by using switching point analysis as well as phase diagrams

asymptotic optimality of order up to policies in lost sales inventory systems we study a single product single location inventory system under periodic review where excess demand is lost and the replenishment lead time is positive the performance measure of interest is the long run average holding cost and lost sales penalty cost for a large class of demand distributions we show that when the lost sales penalty becomes large compared to the holding cost the relative difference between the cost of the optimal policy and the best order up to policy converges to zero for any given cost parameters we establish a bound on this relative difference numerical experiments show that the best order up to policy performs well yielding an average cost that is within 1 5 of the optimal cost when the ratio between the lost sales penalty and the holding cost is 100 we also propose a heuristic order up to level using two newsvendor expressions in our experiments the cost of this order up to policy is 2 52 higher on an average than the best order up to policy

an eoq model with noninstantaneous receipt and exponentially deteriorating items under two level trade credit abstract this paper considers the impact of the trade credit policy on the classical economic production quantity epq model for an item subject to exponential decays essentially this study focuses on an exponentially deteriorating item under the conditions of the retailer receiving the supplier trade credit and providing the customer trade credit simultaneously so as to minimize the average total cost a theorem is developed to determine the optimal replenishment policies the main contribution to literature is the inclusion of the latter type of payment delay finally through numerical examples sensitive analysis shows the influence of key model parameters

note on inventory model with a mixture of back orders and lost sales abstract competitiveness is an important means of determining whether a company will prosper business organizations compete with one another in a variety of ways among these competitive methods are time and cost factors the purpose of this paper is to examine the inventory models presented by padmanabhan and vrat international journal of systems sciences 21 1990 1721 with a mixture of back orders and lost sales we develop the criterion for the optimal solution for the total cost function if the criterion is not satisfied this model will degenerate into one cycle inventory model with a finite inventory period this implies an extension of shortage period as long as possible to produce lower cost however we know that time is another important factor in company competitiveness customers will not indefinitely wait for back orders a tradeoff will be made between the two most important factors time and cost the minimum total cost is evaluated under the diversity cycle time and illustrations are applied to explain the calculation process this work provides a reference for decision makers

design competition through multidimensional auctions this article studies design competition in government procurement by developing a model of two dimensional auctions wherefirms bid on both price and quality and bids are evaluated by a scoring rule designed by a buyer three auction schemes first score second score and second preferred offer are introduced and related to actual practices if the buyer can commit to a scoring rule in his best interest the resulting optimal scoring rule underrewards quality relative to the buyer s utility function and implements the optimal outcome for the buyer underfirst and second score auctions absent the commitment power the onlyfeasible scoring rule is the buyer s utility function under which 1 all three schemes yield the same expected utility to the buyer and 2 first and second score auctions induce the first best level of quality which turns out to be excessive from the buyer s point of view

impact of inventory inaccuracy on service level quality in q r continuous review lost sales inventory models this article focus on the behavior of a q r continuous review lost sales inventory model exposed to an inventory record inaccuracy iri an unusual phenomenon has been observed which runs counter to certain empirical practices in the smes based on the principle that safety stock is only necessary for certain intervals in the data inaccuracy rate both analytical results and simulation modeling are proposed to investigate the relationship between the quality of service safety stock and inventory inaccuracy under demand variations it is shown that the service level quality is a non monotone function of the inaccuracy rate i e the service level quality increases up to an iri level and subsequently decreases other inaccuracy distribution functions have produced the same phenomena with constant demand as well as with demand fluctuations finally another noteworthy result also shows the same phenomenon between the function involving a level of safety stock defined by simulation and the function between the service level quality and iri these different observed results are discussed in terms of both their contribution to the q r inventory management policies in smes and of the limitations to this study

lost sales problems with stochastic lead times convexity results for base stock policies we consider a single location inventory system with periodic review and stochastic demand it places replenishment orders to raise the inventory position that is inventory on hand plus inventory in transit to exactly s at the beginning of every period the lead time associated with each of these orders is random however the lead time process is such that these orders do not cross demand that cannot be met with inventory available on hand is lost permanently we state and prove some sample path properties of lost sales inventory on hand at the end of a period and inventory position at the end of a period as functions of s the main result is the convexity of the expected discounted sum of holding and lost sales costs as a function of s this result justifies the use of common search procedures or linear programming methods to determine optimal base stock levels for inventory systems with lost sales and stochastic lead times it should be noted that the class of base stock policies is suboptimal for such systems and we are primarily interested in them because of their widespread use

admission and inventory control of a single component make to order production system with replenishment setup cost and lead time abstract we consider the admission control and inventory management problems of a single component make to order production system components are purchased from suppliers in batches of fixed size subject to stochastic lead times and setup costs a control policy specifies when a batch of components is purchased and whether the demand for each mto production is accepted upon arrival we formulate the problem as a markov decision process mdp model and characterize the structure of optimal admission control and inventory replenishment policies we show that a state dependent base stock policy is optimal for the inventory replenishment although the mdp value function is not necessarily convex we also show that the optimal admission control can be identified as a lattice dependent policy a sensitivity analysis is conducted to show how the optimal policy changes as a function of the system parameters to effectively coordinate admission and inventory control decisions we propose simple implementable and yet effective heuristic policies our extensive numerical results suggest that the proposed heuristics can greatly help firms to effectively coordinate their admission and inventory control activities

collusive pricing with capacity constraints in the presence of demand uncertainty we explore the response of collusive prices to changing demand conditions when firms operate under capacity constraints in the presence of demand uncertainty we find support for the conventional view that periods of low demand lead through the emergence of excess capacity to a breakdown of collusive pricing we also find that the nature of price wars depends on the degree of excess capacity in the industry while small amounts of excess capacity can lead firms to engage in mild price wars characterized by uniform price reductions and market share stability more severe price wars characterized by price undercutting and market share instability can emerge if excess capacity is sufficiently great finally our results lend support to the view that market share instability is a symptom of ineffective collusion

a stackelberg game and its improvement in a vmi system with a manufacturing vendor vendor managed inventory vmi is an inventory management strategy to let a vendor manage his retailers inventories which makes the vendor have the opportunity to obtain some inventory and market related information of his retailers this paper discusses how the vendor can take advantage of this information for increasing his own profit by using a stackelberg game in a vmi system the vendor here is a manufacturer who procures raw materials to produce a finished product and supplies it at the same wholesale price to multiple retailers the retailers then sell the product in independent markets at retail prices solution procedures are developed to find the stackelberg game equilibrium that each enterprise is not willing to deviate from for maximizing his own profit the equilibrium makes the manufacturer benefited and the retailers profits maximized the equilibrium can then be improved for further benefiting the manufacturer and his retailers if the retailers are willing to cooperate with the manufacturer by using a cooperative contract finally a numerical example and the corresponding sensitivity analysis are given to illustrate that 1 the manufacturer can benefit from his leadership and monopolize the added profit of the vmi system in some cases 2 the manufacturer can further improve his own profit and then the retailers profits by the cooperative contract as compared to the stackelberg equilibrium 3 market and raw material related parameters have significant influence on every enterprise s net profit

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

procurement when price and quality matter a buyer seeks to procure a good characterized by its price and its quality from suppliers who have private information about their cost structure xed cost and marginal cost of providing quality we characterize the buyer s optimal buying mechanism we then use the optimal mechanism as a theoretical and numerical benchmark to study simpler buying procedures such as scoring auctions and bargaining scoring auctions can extract a signifi cant proportion of the buyer s strategic surplus the difference between the expected utility from the optimal mechanism and the e cient auction bargaining does less well and often does worse than the e cient auction

procurement under public scrutiny auctions versus negotiations we compare two commonly used mechanisms in public procurement auctions and negotiations the execution of the procurement mechanism is delegated to an agent of the buyer the agent has private information about the buyer s preferences and may collude with one of the sellers we provide a general characterization of both mechanisms based on public scrutiny requirements and show contrary to conventional wisdom that an intransparent negotiation always yields higher social surplus than a transparent auction moreover there exists a lower bound on the number of sellers such that the negotiation also generates a higher buyer surplus

optimal pricing with speculators and strategic consumers this paper studies a monopolist firm selling a fixed capacity the firm sets a price before demand uncertainty is resolved speculators may enter the market purely with the intention of resale which can be profitable if demand turns out to be high consumers may strategically choose when to purchase and they may also choose to purchase from the firm or from the speculators we characterize equilibrium prices and profits and analyze the long run capacity decisions of the firm there are three major findings first the presence of speculators increases the firm s expected profits even though the resale market competes with the firm second by facilitating resale the firm can mimic dynamic pricing outcomes and enjoy the associated benefits while charging a fixed price third speculative behavior may generate incentives for the seller to artificially restrict supply and thus may lead to lower capacity investments we also explore several model extensions that highlight the robustness of our results

competitive promotional strategies this article analyzes the equilibrium pricing strategies of brands engaged in a pricing game each brand has a monopoly market loyal consumers and competes with others in a common market called brand switchers in the case of a duopoly it is shown that the behavior of the brand switchers characterizes the equilibrium behavior of the duopolists this article focuses on two key comparative statics namely the depth of discounts away from a regular high price and the probability of giving a deal or the frequency of deals how these properties vary with the size of the loyal markets and the behavior of the brand switching population is discussed copyright 1988 by the university of chicago

continuous review lost sales inventory models with poisson demand a fixed lead time and no fixed order cost abstract this paper considers continuous review lost sales inventory models with no fixed order cost and a poisson demand process there is a holding cost per unit per unit time and a lost sales cost per unit the objective is to minimise the long run total cost base stock policies are in general sub optimal under lost sales the optimal policy would have to take full account of the remaining lead times on all the orders currently outstanding and such a policy would be too complex to analyse let alone implement this paper considers policies which make use of the observation that for lost sales models base stock policies can be improved by imposing a delay between the placement of successive orders the performance of these policies is compared with that of the corresponding base stock policy and also with the policy of ordering at fixed and regular intervals of time

modified base stock policies for continuous review lost sales inventory models with poisson demand and a fixed lead time abstract this paper reconsiders the lost sales inventory system studied by hill 2007 the commonly assumed policy to apply to the system is a pure base stock policy pbsp for which the best base stock is easily found hill shows that his simple delay policy sdp and full delay policy fdp perform better the sdp is a s d policy where s is the base stock of the best pbsp and d is a common lower bound on the delay between the placement of successive replenishment orders we show by simulation that the d value suggested by johansen 2001 outperforms hill s suggestion and that the performance often can be further improved by optimizing d for the test bed investigated by hill we show that for some parameter settings an additional improvement is achieved when s and d are optimized simultaneously the policy suggested by johansen performs better than the fdp in all settings where the former policy reduces the average cost of the best pbsp by at least 1

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

overselling in a competitive environment boon or bane in this paper we study the practice of overselling in a competitive environment where late arriving consumers value the good higher than early arriving ones but the former s arrival is uncertain we show that overselling is a dominant strategy for the firms however it can lead to a prisoners dilemma situation in which all firms are worse off overselling we further show that only when demand from the late consumers far exceeds the supply and there is a sufficiently high profit margin from reselling does overselling result in a pareto dominant outcome for the firms

optimal service speeds in a competitive environment this is a study of the economic behavior of vendors of service in competition a simple model with two competing exponential servers and poisson arrivals is considered each server is free to choose his own service rate at a cost per time unit that is strictly convex and increasing there is a fixed reward to a server for each customer that he serves the model is designed to study one specific aspect of competition namely competition in speed of service as a means for capturing a larger market share in order to maximize long run expected profit per time unit a two person strategic game is formulated and its solutions are characterized depending on the revenue per customer served and on the cost of maintaining service rates the following three situations may arise i a unique symmetric strategic nash equilibrium in which expected waiting time is infinite ii a unique symmetric strategic equilibrium in which expected waiting time is finite and iii several nonsymmetric strategic equilibria with infinite expected waiting time an explicit expression for the market share of each server as a function of the service rates of the two servers is also given

a multiechelon inventory model with fixed replenishment intervals this paper develops a new model for studying multiechelon inventory systems with stochastic demand for the model we assume that each site in the system orders at preset times according to an order up to policy that delivery times are deterministic and that the demand processes are stochastic with independent increments we introduce a new scheme for allocating stock in short supply which we call virtual allocation and which permits significant tractability we exercise the model on a set of test problems for two echelon systems to get insight into the structure of good policies the primary findings are that both the central warehouse upper echelon and the retail sites lower echelon should hold safety stock but that most of the safety stock should be at the retail sites consequently the central warehouse will stock out with high probability furthermore we show that the virtual allocation rule is near optimal for the set of test problems

optimal pricing and ordering policy under permissible delay in payments abstract many researchers have assumed that the selling price is the same as the purchase cost and developed various eoq models for a retailer when the supplier offers a permissible delay in payments in this paper we complement the shortcoming of their models by considering the difference between the selling price and the purchase cost we then develop an algorithm for a retailer to determine its optimal price and lot size simultaneously when the supplier offers a permissible delay in payments our theoretical result contradicts to their conclusion that the economic replenishment interval and order quantity generally increases marginally under the permissible delay in payments

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

pure and modified base stock policies for the lost sales inventory system with negligible set up costs and constant lead times abstract the studied inventory system with continuous review has an easily computed optimal s 1 s policy when unsatisfied demands are backlogged we assume that unsatisfied demands are lost and then it is also easy to compute the best s 1 s policy but as demonstrated by roger hill at the isir symposium in 1996 this pure base stock policy can never be optimal if s 2 our focus is on periodic review we use erlang s loss formula to derive approximate expressions for the stockout probability and the average cost these expressions are used to approximate the average cost and to compute a good base stock we formulate and implement a markov decision model to find the optimal replenishment policy the model is solved by a policy iteration algorithm because the optimal policy is often rather complicated we introduce modified base stock policies they are specified by a pair s t where s is the base stock and t is a lower bound for the number of review periods between review epochs in which placing a replenishment order is permitted a simple one has s equal to the base stock computed from erlang s formula and fixes t as the largest integer which is less than or equal to the ratio of the number of review periods per delivery period and s our numerical examples show that the simple modified base stock policy provides most of the cost reduction which can be obtained by replacing the best pure base stock policy by the optimal policy

incorporating quantity discounts to the eoq model with transportation costs abstract this article extends a previous economic order quantity eoq model with two modes of transportation namely truckload tl and less than truckload ltl carriers by introducing all units and incremental quantity discount structures into the analysis exact algorithms are developed for each quantity discount structure to compute optimal policies for single stage models over an infinite planning horizon

price versus production postponement capacity and competition this article presents a comparative analysis of possible postponement strategies in a two stage decision model where firms make three decisions capacity investment production inventory quantity and price typically investments are made while the demand curve is uncertain the strategies differ in the timing of the operational decisions relative to the realization of uncertainty we show how competition uncertainty and the timing of operational decisions influence the strategic investment decision of the firm and its value in contrast to production postponement price postponement makes the investment and production inventory decisions relatively insensitive to uncertainty this suggests that managers can make optimal capacity decisions by deterministic reasoning if they have some price flexibility under price postponement additional postponement of production has relatively small incremental value therefore it may be worthwhile to consider flexible ex post pricing before production postponement reengineering while more postponement increases firm value it is counterintuitive that this also makes the optimal capacity decision more sensitive to uncertainty we highlight the different impact of more timely information which leads to higher investment and inventories and of reduced demand uncertainty which decreases investment and inventories our analysis suggests appropriateness conditions for simple make to stock and make to order strategies we also present technical sufficiency and uniqueness conditions under price postponement these results extend to oligopolistic and perfect competition for which pure equilibria are derived interestingly the relative value of operational postponement techniques seems to increase as the industry becomes more competitive

research note overselling with opportunistic cancellations in many business sectors such as airlines hotels trucking and media advertising customers arrivals and willingness to pay are uncertain managers must decide whether to quote a price low enough to guarantee early sales or to quote a higher price and risk that some units remain unsold in allocating capacity they face a trade off between two types of potential losses 1 yield loss selling at a low price and losing a better price later and 2 spoilage loss waiting in vain to sell at a high price and losing the opportunity of an earlier low price offer yield loss means that consumers who value the product most do not get to use it and spoilage loss means that valuable products are wasted because no consumers get to use them sellers typically hedge against the risk of spoilage loss by selling some units early at low prices and against the risk of yield loss by blocking some units in hope of selling them later at a high price in this paper we show that the use of overselling with opportunistic cancellations can increase expected profits and improve allocation efficiency under this strategy the seller deliberately oversells capacity if high paying consumers show up even when capacity is already fully booked the seller then cancels the sale to some low paying customers while providing them with appropriate compensation we derive a new rule to optimally allocate capacity to consumers when overselling is used and show that overselling helps limit the potential yield and spoilage losses yield loss is reduced because the seller can capture more high paying customers by compensating low paying customers who give up their right to the product spoilage loss is reduced because the compensation decreases the price spread perceived by the seller and as a result the seller is less anxious to speculate and block units overselling with opportunistic cancellations assures that the product will be sold to consumers who value it most this means that everybody wins and resources are allocated more efficiently than in conventional selling

heterogeneity promoting optimal procurement abstract when procurement takes place in the presence of horizontally differentiated contractors the design of the object being procured affects the resulting degree of competition this paper highlights the interaction between the optimal procurement mechanism and the design choice contrary to conventional wisdom the sponsor s design choice instead of homogenizing the market to generate competition promotes heterogeneity

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

modeling the effects of mergers in procurement in procurement settings mergers among suppliers reduce buyers choice sets and can harm buyers by eliminating their preferred supplier or reducing their negotiating leverage i develop a stochastic economic model that predicts the effects of mergers based on information that commonly is available to antitrust authorities i derive general expressions for the ex ante expected changes in price buyer utility and supplier profit each becomes tractable under certain distributional assumptions the model predicts that average prices will increase by more than 40 due to the recently litigated acquisition of power reviews by bazaarvoice in the absence of an effective remedy

revenue management under customer choice behaviour with cancellations and overbooking abstract in many application areas such as airlines and hotels a large number of bookings are typically cancelled explicitly taking into account cancellations creates an opportunity for increasing revenue motivated by this we propose a revenue management model based on talluri and van ryzin 2004 that takes cancellations into account in addition to customer choice behaviour moreover we consider overbooking limits as these are influenced by cancellations we model the problem as a markov decision process and propose three dynamic programming formulations to solve the problem each appropriate in a different setting we show that in certain settings the problem can be solved exactly using a tractable solution method for other settings we propose tractable heuristics since the problem faces the curse of dimensionality numerical results show that the heuristics perform almost as good as the exact solution however the model without cancellations can lead to a revenue loss of up to 20 percent lastly we provide a parameter estimation method based on newman et al 2014 this estimation method is fast and provides good parameter estimates the combination of the model the tractable and well performing solution methods and the parameter estimation method ensures that the model can efficiently be applied in practice

game theoretic pricing and ordering decisions with partial lost sales in two stage supply chains abstract few papers have studied the optimal pricing and ordering with partial lost sales from a two stage game theoretic perspective this paper considers a supply chain game with a buyer and a seller through pricing and ordering models with partial lost sales we evaluate the optimal solutions for the buyer and the seller and provide insights into both the deterministic and stochastic demand models we also propose search algorithms to obtain the global optimum when convexity and concavity conditions are not satisfied