Economics Seminar（2013-02）
Topic: Revenue Management without Commitment: Dynamic Pricing with Periodic Fire Sales
Sperker: Fei Li(//economics.sas.upenn.edu/graduate-program/candidates/fei-li or //lifei.weebly.com/ )
Affiliation: University of Pennsylvania
Time：2:00-3:30pm, Tuesday, March 5
Location：Room 217, Guanghua New Building
Abstract.
We consider a market with a profit-maximizing monopolist seller who has K identical goods to sell before a deadline. At each date, the seller posts a price and the quantity available but cannot commit to future offers. Over time, potential buyers with different reservation values enter the market. Buyers strategically time their purchases, trading off (1) a possibly lower price in the future with the risk of being rationed and (2) the current price without competition. We analyze equilibrium price paths and buyers' purchase behavior. We show that incentive compatible price paths decline smoothly over the time period between sales and jump up immediately after a transaction. In equilibrium, high-value buyers purchase immediately on arrival. Crucially, before the deadline, the seller may periodically liquidate part of his stock via a fire sale to secure a higher price in the future. Intuitively, these sales allow the seller to ‘commit’ to high prices going forward. The possibility of fire sales before the deadline implies that the allocation may be inefficient. The inefficiency arises from the scarce good being misallocated to low value buyers, rather than the withholding inefficiency that is normally seen with a monopolist seller.
Your participation is warmly welcomed!
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