Dynamic Pricing and Inventory Management: Theory and Applications.
Degree: PhD, Business Administration, 2016, Washington University in St. Louis
We develop the models and methods to study the impact of some emerging trends in technology, marketplace, and society upon the pricing and inventory policy of a firm. We focus on the situation where the firm is in a dynamic, uncertain, and (possibly) competitive market environment. The market trends of particular interest to us are: (a) social networks, (b) sustainability concerns, and (c) customer behaviors. The two main running questions this dissertation aims to address are: (a) How these emerging market trends would influence the operations decisions and profitability of a firm; and (b) What pricing and inventory strategies a firm could use to leverage these trends. We also develop an effective comparative statics analysis method to address these two questions under different market trends.
Overall, our results suggest that the current market trends of social networks, sustainability concerns, and customer behaviors have significant and interesting impact upon the operations policy of a firm, and that the firm could adopt some innovative pricing and inventory strategies to exploit these trends and substantially improve its profit. Our main findings are:
(a) Network externalities (the monopoly setting). We find that network externalities prompt a firm to face the tradeoff between generating current profits and inducing future demands when making the price and inventory decisions, so that it should increase the base-stock level, and to decrease [increase] the sales price when the network size is small [large]. Our extensive numerical experiments also demonstrate the effectiveness of the heuristic policies that leverage network externalities by balancing generating current profits and inducing demands in the near future. (Chapter 2.)
(b) Network externalities (the dynamic competition setting). In a competitive market with network externalities, the competing firms face the tradeoff between generating current profits and winning future market shares (i.e., the exploitation-induction tradeoff). We characterize the pure strategy Markov perfect equilibrium in both the simultaneous competition and the promotion-first competition. We show that, to balance the exploitation-induction tradeoff, the competing firms should increase promotional efforts, offer price discounts, and improve service levels. The exploitation-induction tradeoff could be a new driving force for the fat-cat effect (i.e., the equilibrium promotional efforts are higher under the promotion-first competition than those under the simultaneous competition). (Chapter 3.)
(d) Trade-in remanufacturing. We show that, with the adoption of the very commonly used trade-in remanufacturing program, the firm may enjoy a higher profit with strategic customers than with myopic customers. Moreover, trade-in remanufacturing creates a tension between firm profitability and environmental sustainability with strategic customers, but benefits both the firm and the environment with myopic customers. We also find that, with either strategic or…
Advisors/Committee Members: Nan Fuqiang . Yang Zhang, Amr Farahat, Jake Feldman, John Nachbar.
Subjects/Keywords: Comparative Statics, Dynamic Pricing, Inventory Management, Social Networks, Supply Chain Management, Sustainability; Applied Mathematics; Business Administration, Management, and Operations; Management Sciences and Quantitative Methods; Operational Research
…of Philosophy in Business Administration
Washington University in St. Louis, 2016
to Zotero / EndNote / Reference
APA (6th Edition):
Zhang, R. (2016). Dynamic Pricing and Inventory Management: Theory and Applications. (Doctoral Dissertation). Washington University in St. Louis. Retrieved from https://openscholarship.wustl.edu/art_sci_etds/816
Chicago Manual of Style (16th Edition):
Zhang, Renyu. “Dynamic Pricing and Inventory Management: Theory and Applications.” 2016. Doctoral Dissertation, Washington University in St. Louis. Accessed September 19, 2020.
MLA Handbook (7th Edition):
Zhang, Renyu. “Dynamic Pricing and Inventory Management: Theory and Applications.” 2016. Web. 19 Sep 2020.
Zhang R. Dynamic Pricing and Inventory Management: Theory and Applications. [Internet] [Doctoral dissertation]. Washington University in St. Louis; 2016. [cited 2020 Sep 19].
Available from: https://openscholarship.wustl.edu/art_sci_etds/816.
Council of Science Editors:
Zhang R. Dynamic Pricing and Inventory Management: Theory and Applications. [Doctoral Dissertation]. Washington University in St. Louis; 2016. Available from: https://openscholarship.wustl.edu/art_sci_etds/816