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Authors: Rainer Schlosser and Martin Boissier

Affiliation: Hasso Plattner Institute, Germany

ISBN: 978-989-758-218-9

Keyword(s): Dynamic Pricing, Competition, Optimal Control, Response Strategies, Reaction Time, Price Cycles.

Related Ontology Subjects/Areas/Topics: Artificial Intelligence ; Business Analytics ; Cardiovascular Technologies ; Computing and Telecommunications in Cardiology ; Data Engineering ; Decision Support Systems ; Decision Support Systems, Remote Data Analysis ; Dynamic Programming ; Game Theory ; Health Engineering and Technology Applications ; Knowledge Discovery and Information Retrieval ; Knowledge-Based Systems ; Methodologies and Technologies ; Operational Research ; Optimization ; Symbolic Systems

Abstract: Many markets are characterized by pricing competition. Typically, competitors are involved that adjust their prices in response to other competitors with different frequencies. We analyze stochastic dynamic pricing models under competition for the sale of durable goods. Given a competitor’s pricing strategy, we show how to derive optimal response strategies that take the anticipated competitor’s price adjustments into account. We study resulting price cycles and the associated expected long-term profits. We show that reaction frequencies have a major impact on a strategy’s performance. In order not to act predictable our model also allows to include randomized reaction times. Additionally, we study to which extent optimal response strategies of active competitors are affected by additional passive competitors that use constant prices. It turns out that optimized feedback strategies effectively avoid a decline in price. They help to gain profits, especially, when aggressive competitors are involved. (More)

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Paper citation in several formats:
Schlosser R. and Boissier M. (2017). Optimal Price Reaction Strategies in the Presence of Active and Passive Competitors.In Proceedings of the 6th International Conference on Operations Research and Enterprise SystemsISBN 978-989-758-218-9, pages 47-56. DOI: 10.5220/0006118200470056

@conference{icores17,
author={Rainer Schlosser and Martin Boissier},
title={Optimal Price Reaction Strategies in the Presence of Active and Passive Competitors},
booktitle={Proceedings of the 6th International Conference on Operations Research and Enterprise Systems},
year={2017},
pages={47-56},
doi={10.5220/0006118200470056},
isbn={978-989-758-218-9},
}

TY - CONF

JO - Proceedings of the 6th International Conference on Operations Research and Enterprise Systems
TI - Optimal Price Reaction Strategies in the Presence of Active and Passive Competitors
SN - 978-989-758-218-9
AU - Schlosser R.
AU - Boissier M.
PY - 2017
SP - 47
EP - 56
DO - 10.5220/0006118200470056

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