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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/14106
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| Title: | Online Auction and List Price Revenue Management |
| Authors: | Caldentey, Rene
Vulcano, Gustavo |
| Keywords: | revenue management
strategic behavior
online auction
asymptotic
dual channel |
| Issue Date: | 13-Apr-2004 |
| Publisher: | Stern School of Business, New York University |
| Series/Report no.: | CeDER-05-10 |
| Abstract: | We analyze a revenue management problem in which a seller facing a
Poisson arriving stream of customers operates an online multiunit
auction. Customers have an alternative list price channel where to get
the product from. We consider two variants of this problem: In the first
one, the list price is an external channel run by another firm. In the
second variant, the seller manages simultaneously both the auction and
the list price channels. Each consumer, trying to maximize his own
surplus, must decide either to buy at the posted price and get the item
at no risk, or to join the auction and wait until its end, where the
winners are revealed and the auction price is disclosed. Our approach
consists of two parts. First, we study structural properties of the
problem, and show that the equilibrium strategy for both versions of
this game is of the threshold type, meaning that a consumer will join
the auction only if his arrival time is above a function of his own
valuation. This consumerâs strategy can be computed using an
iterative algorithm in a function space, provably convergent under some
conditions. Unfortunately, this procedure is computationally intensive.
To overcome this, we formulate an asymptotic version of the problem, in
which the demand rate and the initial number of units grow
proportionally large. We get a simple closed form for the equilibrium
strategy in this regime, which is then used as an approximated solution
for the original problem. Numerical computations show that this
heuristic is very accurate. The asymptotic solution culminates then in
simple and precise recipes for how bidders should behave, and how the
seller should structure the auction, and price the product in the dual
channel case. |
| URI: | http://hdl.handle.net/2451/14106 |
| Appears in Collections: | CeDER Working Papers
IOMS: Information Systems Working Papers
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