Revenue Management Without Commitment: Dynamic Pricing and Periodic Flash Sales

Francesc Dilme and Fei Li ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

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.

Keywords: revenue management; commitment power; dynamic pricing; flash sales; inattention frictions (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Pages: 56
Date: 2019-04
New Economics Papers: this item is included in nep-com and nep-mic
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Citations: View citations in EconPapers (18)

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Journal Article: Revenue Management without Commitment: Dynamic Pricing and Periodic Flash Sales (2019)
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