Revenue Management Without Commitment: Dynamic Pricing and Periodic Flash Sales

58 Pages Posted: 13 May 2014 Last revised: 8 Aug 2018

See all articles by Francesc Dilme

Francesc Dilme

University of Bonn

Fei Li

University of North Carolina (UNC) at Chapel Hill

Date Written: August 6, 2018

Abstract

A seller has a fixed number of goods to sell by a deadline. At each time, he posts a regular price and decides whether to hold a flash sale. Over time, buyers privately enter the market and strategically time their purchases. If a buyer does not purchase when she arrives, she can pay an attention cost to recheck the regular price afterwards, or she can wait for future flash sales where she may obtain a good at a discounted price. In the Markov perfect equilibrium, the seller sporadically holds flash sales to lower the stock of goods. A flash sale increases the willingness to pay of future buyers, but decreases the willingness to pay of buyers who arrive early in the game. When it is very likely that a buyer will obtain a good in a flash sale, the seller holds a ``big'' initial flash sale for all but one unit of the good.

Keywords: revenue management, commitment power, dynamic pricing, fire sales, inattention frictions

JEL Classification: D82, D83

Suggested Citation

Dilme, Francesc and Li, Fei, Revenue Management Without Commitment: Dynamic Pricing and Periodic Flash Sales (August 6, 2018). Available at SSRN: https://ssrn.com/abstract=2435982 or http://dx.doi.org/10.2139/ssrn.2435982

Francesc Dilme

University of Bonn ( email )

Lennestrasse 35
53113 Bonn
Germany
0049228737957 (Phone)

Fei Li (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
531
Abstract Views
2,809
rank
67,440
PlumX Metrics