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Revenue Management Without Commitment: Dynamic Pricing and Periodic Flash Sales

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  • Francesc Dilmé
  • Fei Li

Abstract

A seller has a fixed number of goods to sell by a deadline. At each time, he posts a regular price and decides whether to hold a flash sale. Over time, buyers privately enter the market and strategically time their purchases. If a buyer does not purchase when she arrives, she can pay an attention cost to recheck the regular price afterwards, or she can wait for future flash sales where she may obtain a good at a discounted price. In the unique Markov perfect equilibrium, the seller sporadically holds flash sales to lower the stock of goods. A flash sale increases the willingness to pay of future buyers, but decreases the willingness to pay of buyers who arrive early in the game. When it is very likely that a buyer will obtain a good in a flash sale, the seller holds a 'big' initial flash sale for all but one unit of the good.

Suggested Citation

  • Francesc Dilmé & Fei Li, 2019. "Revenue Management Without Commitment: Dynamic Pricing and Periodic Flash Sales," CRC TR 224 Discussion Paper Series crctr224_2019_083, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_083
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp083
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    Cited by:

    1. Correia-da-Silva, João, 2021. "Optimal priority pricing by a durable goods monopolist," Games and Economic Behavior, Elsevier, vol. 129(C), pages 310-328.
    2. Gaurab Aryal & Charles Murry & Jonathan W Williams, 2024. "Price Discrimination in International Airline Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(2), pages 641-689.
    3. Aniko …ry & Ali Horta su & Kevin Williams, 2022. "Dynamic Price Competition: Theory and Evidence from Airline Markets," Cowles Foundation Discussion Papers 2341R1, Cowles Foundation for Research in Economics, Yale University, revised Apr 2023.
    4. Gregorio Curello & Ludvig Sinander, 2020. "Screening for breakthroughs," Papers 2011.10090, arXiv.org, revised Feb 2024.
    5. Peter Seele & Claus Dierksmeier & Reto Hofstetter & Mario D. Schultz, 2021. "Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing," Journal of Business Ethics, Springer, vol. 170(4), pages 697-719, May.
    6. Zhang, Hanzhe, 2021. "The optimal sequence of prices and auctions," European Economic Review, Elsevier, vol. 133(C).
    7. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2023. "Which is better for durable goods producers, exclusive or open supply chain?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 158-176, January.
    8. Joosung Lee & Daniel Z. Li, 2023. "Seller Compound Search for Bidders," Journal of Industrial Economics, Wiley Blackwell, vol. 71(4), pages 1004-1037, December.
    9. Ortner, Juan, 2023. "Bargaining with evolving private information," Theoretical Economics, Econometric Society, vol. 18(3), July.
    10. Francesc Dilmé, 2024. "Bargaining with Binary Private Information," CRC TR 224 Discussion Paper Series crctr224_2024_515, University of Bonn and University of Mannheim, Germany.
    11. Emil Temnyalov, 2019. "Points mechanisms and rewards programs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 436-457, June.
    12. Francesc Dilmé & Daniel Garrett, 2022. "A Dynamic Theory of Random Price Discounts," ECONtribute Discussion Papers Series 191, University of Bonn and University of Cologne, Germany.
    13. Kevin R. Williams, 2022. "The Welfare Effects of Dynamic Pricing: Evidence From Airline Markets," Econometrica, Econometric Society, vol. 90(2), pages 831-858, March.
    14. Kevin R. Williams, 2017. "Dynamic Airline Pricing and Seat Availability," Cowles Foundation Discussion Papers 2103R, Cowles Foundation for Research in Economics, Yale University, revised May 2020.
    15. James D. Dana Jr. & Kevin R. Williams, 2018. "This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show the existence of multiple sales opportunities cr," Cowles Foundation Discussion Papers 2136R4, Cowles Foundation for Research in Economics, Yale University, revised Nov 2021.
    16. Joan Carles Cirer-Costa, 2022. "Qualitative revenue management in sun-and-beach hotels," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(4), pages 462-469, August.
    17. Santiago R. Balseiro & Omar Besbes & Gabriel Y. Weintraub, 2019. "Dynamic Mechanism Design with Budget-Constrained Buyers Under Limited Commitment," Operations Research, INFORMS, vol. 67(3), pages 711-730, May.
    18. James D. Dana & Kevin R. Williams, 2022. "Intertemporal Price Discrimination in Sequential Quantity-Price Games," Marketing Science, INFORMS, vol. 41(5), pages 966-981, September.
    19. Kevin R. Williams, 2017. "The Welfare Effects of Dynamic Pricing: Evidence from Airline Markets," Cowles Foundation Discussion Papers 2103R2, Cowles Foundation for Research in Economics, Yale University, revised Jun 2021.

    More about this item

    Keywords

    revenue management; commitment power; dynamic pricing; flash sales; inattention frictions;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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