IDEAS home Printed from https://ideas.repec.org/a/taf/uiiexx/v49y2017i3p304-319.html
   My bibliography  Save this article

Selling through Priceline? On the impact of name-your-own-price in competitive market

Author

Listed:
  • Xiao Huang
  • Greys Sošić
  • Gregory Kersten

Abstract

Priceline.com patented the innovative pricing strategy, Name-Your-Own-Price (NYOP), that sells opaque products through customer-driven pricing. In this article, we study how competitive sellers with substitutable, non-replenishable goods may sell their products (i) as regular goods, through a direct channel at posted prices, and possibly at the same time (ii) as opaque goods, through a third-party channel that engages in NYOP. We establish a stylized model framework that incorporates three sets of stakeholders: two competing sellers, an intermediary NYOP firm, and a sequence of customers. We first characterize customers’ optimal purchasing/bidding decisions under various channel structures and then analyze corresponding sellers’ dynamic pricing equilibrium. We conduct extensive numerical studies to illustrate the impact of inventory and time on equilibrium prices, expected profit, and channel strategies. We find that the implications are highly dependent on channel structure (dual versus single). In particular, more inventory may reduce one’s expected profit under the dual structure, whereas this never happens when a seller only uses the direct channel. Interestingly, although competing sellers seldom benefit from the existence of NYOP channels, it is possible that one or both of the sellers adopt it in equilibrium. We identify timing, inventory levels, and channel opaqueness as key drivers for NYOP adoption and characterize equilibrium areas for each type of channel structure.

Suggested Citation

  • Xiao Huang & Greys Sošić & Gregory Kersten, 2017. "Selling through Priceline? On the impact of name-your-own-price in competitive market," IISE Transactions, Taylor & Francis Journals, vol. 49(3), pages 304-319, March.
  • Handle: RePEc:taf:uiiexx:v:49:y:2017:i:3:p:304-319
    DOI: 10.1080/0740817X.2016.1237060
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/0740817X.2016.1237060
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/0740817X.2016.1237060?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ningyuan Chen & Adam N. Elmachtoub & Michael L. Hamilton & Xiao Lei, 2021. "Loot Box Pricing and Design," Management Science, INFORMS, vol. 67(8), pages 4809-4825, August.
    2. Adam N. Elmachtoub & Michael L. Hamilton, 2021. "The Power of Opaque Products in Pricing," Management Science, INFORMS, vol. 67(8), pages 4686-4702, August.
    3. Nosoohi, Iman, 2022. "Posted price and name-your-own-price in a product line design problem," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    4. Zhang, Yi & Hua, Guowei & Cheng, T.C.E. & Zhang, Juliang & Fernandez, Vicenc, 2020. "Risk pooling through physical probabilistic selling," International Journal of Production Economics, Elsevier, vol. 219(C), pages 295-311.
    5. Mashalah, Heider Al & Hassini, Elkafi & Gunasekaran, Angappa & Bhatt (Mishra), Deepa, 2022. "The impact of digital transformation on supply chains through e-commerce: Literature review and a conceptual framework," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:uiiexx:v:49:y:2017:i:3:p:304-319. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/uiie .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.