Authors:
Fredrik Thuring
1
;
Jens Perch Nielsen
1
;
Montserrat Guillén
2
and
Catalina Bolancé
2
Affiliations:
1
Cass Business School, United Kingdom
;
2
University of Barcelona, Spain
Keyword(s):
Cross-Sales, Call Center, Dynamic Pricing, Price Elasticity of Demand, Closed form Expressions, Multivariate B¨uhlmann-Straub Credibility, Financial Services, Insurance Industry.
Related
Ontology
Subjects/Areas/Topics:
Artificial Intelligence
;
Decision Analysis
;
Decision Support Systems
;
Knowledge Discovery and Information Retrieval
;
Knowledge-Based Systems
;
Management Sciences
;
Mathematical Modeling
;
Methodologies and Technologies
;
Operational Research
;
Optimization
;
Optimization in Finance
;
Symbolic Systems
Abstract:
In this paper we consider segmentation of a company’s customer data base with respect to the future expected profit, emerging from not yet sold products. We consider a situation where the company is interested in contacting a subset of the customers in the data base to offer additional products. The price at which the products are offered may vary and by utilizing an estimate of the price elasticity of demand, we are able to find closed a form expression of the optimal price as well as the corresponding expected profit, for each customer prospect. We implement the methodology and test it using real data from a major Scandinavian insurance company. We underline that a closed form expression of the optimal price is seldom found in the dynamic pricing literature, suggesting that our pricing formula would be of interest to a broad audience of economists,
econometricians, pricing managers and actuaries.