PRODUCT VARIETY AND PRICING DECISIONS WHEN STRATEGIC BUYERS PURCHASE MULTIPLE UNITS

Date

2023-9-5

Author

Akkocaoğlu Çatmakaş, Hale

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We study the product variety and pricing problem of a seller offering two horizontally differentiated products to buyers purchasing multiple units in two periods. Each buyer aims to maximize her utility over two periods and is strategic in timing and quantity. The seller sets the price in each period to maximize his profit. This problem is modelled as leader-follower game and three variations are discussed. First, we focus on the pricing problem of a seller offering a single product with ample supply. We show the existence and uniqueness of the Nash equilibrium of the game between the buyers and derive the equilibrium of the two-stage sequential game between the seller and the buyers. Strategic buyer interaction decreases the seller profit. Commitment pricing is studied where the retailer announces a price path at the beginning of the selling horizon. The seller prefers commitment over sequential pricing when the buyers are impatient or when the cost of the item in the earlier period is relatively low. Secondly, we consider a single product with limited inventory. The impact of inventory and the value of information on inventory level are discussed. Sharing inventory information is more advantageous for the seller when inventory levels are low, while it turns into a disadvantage as inventory levels increase. When inventory levels are either very low or high, emphasizing the greater importance of having strategic buyer information for v inventory levels in between. A sequential two-period pricing problem with two horizontally substitutable products is considered with inventory limitation. The impact of inventory levels, strategic waiting tendencies, and product substitution parameters are explored. The seller’s profit decreases as the cost and similarity of products increase. Offering an inventory-constrained product alongside a product with ample supply is preferred as customer patience levels increase, allowing the seller to mitigate strategic waiting behavior.

Subject Keywords

Product variety, Strategic customer

URI

https://hdl.handle.net/11511/105585

Collections

Graduate School of Natural and Applied Sciences, Thesis