Prof. Qian Liu
Hong Kong University of Science and Technology
Talk:
Dynamic Pricing Competition with Strategic Customers under Vertical Product Differentiation
Abstract:
We consider multi-period dynamic pricing competition between two sellers offering vertically differentiated products to strategic customers that are inter-temporal utility maximizers. Our model can be viewed as an extension of the classical model of Besanko and Winston (1990) to a competitive setting. Under mild regulatory assumptions, we establish a unique Markov perfect equilibrium, which admits simple recursive expressions. We obtain results when all customers are myopic as a special case. An extensive numerical study reveals the key role of product quality: the low-quality seller suffers much more than the high-quality seller from strategic customer behavior. Furthermore, we show that dynamic pricing is often undesirable for both sellers and the detrimental effects are almost fully realized even when each seller only changes price once. Our results imply that the commitment to charge a fixed price is often very valuable when customers are strategic. This is joint work with Dan Zhang.
Biography:
Qian Liu is currently an assistant professor in the department of Industrial Engineering and Logistics Management at the Hong Kong University of Science and Technology. Her research interest includes revenue management and pricing, consumer behavior in operations management. She received the Ph.D. degree in Decision, Risk and Operations from Columbia University in 2006, and the B.E. and M.E. in Control Theory and Control Engineering from Tsinghua University in 1998 and 2001, respectively.
