CORS / Optimization Days 

HEC Montréal, May 29-31, 2023


HEC Montreal, 29 — 31 May 2023

Schedule Authors My Schedule

PAOII Pricing and Assortment Optimization II

May 30, 2023 03:30 PM – 05:10 PM

Location: Cogeco (blue)

Chaired by Can Baris Cetin

4 Presentations

  • 03:30 PM - 03:55 PM

    Upgrade Pricing under Dependent Demand Distributions

    • Mihai Banciu, presenter, Bucknell University
    • Fredrik Odegaard, Western University

    Motivate by the business practice to offer upgrades, e.g. buy-up for a higher fare class, we consider a seller pricing two products and an upgrade price to heterogenous customers. Customer valuations follow a bivariate distribution with a general dependence structure such that the buy-up propensity is endogenous.

  • 03:55 PM - 04:20 PM

    Should Luxury brands make a partnership with second-hand market resellers?

    • Atousa Akhlaghy, presenter, Wilfrid Laurier University
    • Salar Ghamat, Wilfrid Laurier University
    • Mojtaba Araghi, Wilfrid Laurier University

    The market for pre-owned luxury items is expanding at a rapid pace and is growing five times faster than the new luxury sales. Currently, there are several online retailers that are selling certified used luxurious items independently or in cooperation with the original manufacturer. This market expands the opportunity of receiving the utility of not only consuming the product but also of signalling status to a larger group of customers. In this work, we use a game-theoretical model to examine a luxury brand selling goods in presence of second-hand market resellers. By analyzing a dynamic game between these two firms, we identify conditions under which the primary luxury brand should partner with resellers, and the structure of optimal decisions made by each party.
    Keywords: luxury sales/pre-owned luxury items/ pricing strategies/game theory

  • 04:20 PM - 04:45 PM

    Simultaneous vs. Seq uen tial Product Release

    • Ningyuan Chen,
    • Setareh Farajollahzadeh, presenter, Rotman School of Management
    • Ming Hu, Columbia University

    We are studying the release strategy of media content, where the content creators, such as authors or producers of series, are uncertain about the level of consumer interest in their product. They must decide whether to release all the content at once or release it in sequential episodes. With each episode release, a buzz is generated in the market, which attracts consumers to the product but fades away in the following period. During each period, consumers may learn about the content's attractiveness through direct experience (private learning), reading other users' reviews (social learning), or reading expert comments (public learning). We determine the seller's optimal pricing and release strategy under different learning settings.

  • 04:45 PM - 05:10 PM

    Strategic Pricing and Investment in Environmental Quality by an Incumbent Facing a Greenwasher Entrant

    • Can Baris Cetin, presenter, HEC Montreal, GERAD
    • Arka Mukherjee, Concordia University
    • Georges Zaccour, HEC Montreal, GERAD

    Greenwashing is the act of positively projecting a firm’s environmental performance when it is not truly up to the mark. In the context of greenwashing, quality is often compromised in order to make environmental claims that are not supported by evidence. In this paper, we analyze the effect of greenwashing on firms’ strategies and outcomes and consumers. We consider a two-stage game where a monopolist makes pricing and environmental quality investment in the first stage and competes with an entrant in the second stage. The incumbent is a green firm and does not overrate the environmental quality of its product, while the entrant may be tempted by greenwashing. We assume that only inexperienced consumers, that is, consumers who did not purchase the product in the first period, can be lured by greenwashing. Consequently, our model captures two important dynamic features, namely, the change in the competitive structure, and the presence of a “learning” effect in the market. We investigate the conditions that make greenwashing profitable for the entrant, how the incumbent responds to greenwashing, and the impact of greenwashing on the environment and customers.