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- Article] Will More Purchasing Options Benefit Customers?
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DocNo of ILP: 3192
Doc. Type: Article
Title: Will More Purchasing Options Benefit Customers?
Authors: Elmaghraby, W; Lippman, SA; Tang, CS; Yin, R
Full Name of Authors: Elmaghraby, Wedad; Lippman, Steven A.; Tang, Christopher S.; Yin, Rui
Keywords by Author: retailing; reservation; contingent sales; callable products; revenue management
Keywords Plus: DEMAND UNCERTAINTY; REVENUE MANAGEMENT; PRICE; CAPACITY; CONSUMERS; PRODUCTS; AUCTIONS
Abstract: This paper considers the sale of a seasonal product in the face of strategic customers. At the beginning of the selling season, the retailer announces both the price p(h) at which the product will be sold during the selling season and the post-season clearance price p(l) < p(h) for unsold items. We analyze two operating regimes: The "no reservation regime'' allows a buyer either to purchase the product at price ph when he arrives or to enter a lottery to purchase at price p(l) if the product remains unsold. The "reservation regime'' offers each buyer one extra option than the no reservation regime: reserve the product for purchase at the clearance price p(l). If the buyer reserves the product under the reservation regime and if it remains unsold at the end of the selling season, then he is obligated to purchase it at price p(l). We consider a situation in which heterogeneous customers with probabilistic valuation arrive in accord with a Poisson process. We characterize the rational purchasing behavior wherein each arriving customer is strategic; each customer takes other customers' purchasing behavior into consideration. By considering the Nash equilibrium of this game, we show that strategic customer behavior can render the customer to be worse off and the retailer to be better off under the reservation regime, despite the fact that this regime offers one extra option (reservation) to a customer. Hence, more purchasing options do not necessarily benefit customers.
Cate of OECD: Other engineering and technologies
Year of Publication: 2009
Business Area: lottery
Detail Business: lottery
Country: USA
Study Area:
Name of Journal: PRODUCTION AND OPERATIONS MANAGEMENT
Language: English
Country of Authors: [Elmaghraby, Wedad] Univ Maryland, Smith Sch Business, College Pk, MD 20742 USA; [Lippman, Steven A.; Tang, Christopher S.] Univ Calif Los Angeles, Anderson Sch, Los Angeles, CA 90095 USA; [Yin, Rui] Arizona State Univ, WP Carey Sch Business, Tempe, AZ 85287 USA
Press Adress: Elmaghraby, W (reprint author), Univ Maryland, Smith Sch Business, College Pk, MD 20742 USA.
Email Address: Wedad_Elmaghraby@rhsmith.umd.edu; slippman@anderson.ucla.edu; ctang@anderson.ucla.edu; rui.yin@asu.edu
Citaion:
Funding:
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Number of Citaion: 34
Publication: PRODUCTION OPERATIONS MANAGEMENT SOC
City of Publication: BALTIMORE
Address of Publication: UNIV BALTIMORE, 1420 CHARLES ST, BALTIMORE, MD 21201 USA
ISSN: 1059-1478
29-Character Source Abbreviation: PROD OPER MANAG
ISO Source Abbreviation: Prod. Oper. Manag.
Volume: 18
Version: 4
Start of File: 381
End of File: 401
DOI: 10.3401/poms.1080.01041
Number of Pages: 21
Web of Science Category: Engineering, Manufacturing; Operations Research & Management Science
Subject Category: Engineering; Operations Research & Management Science
Document Delivery Number: 467BV
Unique Article Identifier: WOS:000267712300003
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