Dynamic Pricing for Heterogeneous Time-Sensitive Customers

63 Pages Posted: 26 Jun 2017 Last revised: 14 Oct 2018

See all articles by Negin Golrezaei

Negin Golrezaei

Massachusetts Institute of Technology - MIT Sloan School of Management

Hamid Nazerzadeh

University of Southern California - Marshall School of Business

Ramandeep S. Randhawa

University of Southern California

Date Written: June 1, 2017

Abstract

A core problem in the area of revenue management is pricing goods in the presence of strategic customers. We study this problem when customers are heterogeneous with respect to their initial valuations for the item and their time sensitivities, i.e., the customers differ in both their initial valuations and the rates at which their initial valuation decreases with delay in purchase. We characterize the optimal mechanism for selling durable goods in such environments and show that delayed allocation and dynamic pricing can be effective screening tools for maximizing firm profit. We also investigate the impact of production and holding costs on the optimal mechanism.

Suggested Citation

Golrezaei, Negin and Nazerzadeh, Hamid and Randhawa, Ramandeep S., Dynamic Pricing for Heterogeneous Time-Sensitive Customers (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2992112 or http://dx.doi.org/10.2139/ssrn.2992112

Negin Golrezaei (Contact Author)

Massachusetts Institute of Technology - MIT Sloan School of Management ( email )

100 Main Street
Building E62-577
Cambridge, MA 02142
United States

Hamid Nazerzadeh

University of Southern California - Marshall School of Business ( email )

Bridge Memorial Hall
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~nazerzad/

Ramandeep S. Randhawa

University of Southern California ( email )

Marshall School of Business
BRI 401, 3670 Trousdale Parkway
Los Angeles, CA 90089
United States

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