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Fall 2012 Seminar Series

MASSACHUSETTS INSTITUTE OF TECHNOLOGY
OPERATIONS RESEARCH CENTER
FALL 2012 SEMINAR SERIES

DATE: September 13th
LOCATION: E51-376
TIME: 4:15pm
Reception immediately following

SPEAKER:
Yossi Aviv

TITLE
Dynamic Pricing of Fashion Products: The Effects of Demand Learning and Strategic Consumer Behavior

ABSTRACT
In this seminar, we will present a dynamic-pricing model of a retailer that sells a product in a market where consumers exhibit strategic behavior. A key feature of the model is that the seller can learn about the market size through initial sales observations. This raises an interesting phenomenon: via their decision to purchase or wait, consumers influence the seller’s perception about the market size. We will discuss the implication of the latter point on the effectiveness of price segmentation, and examine the value of price commitment strategies. We will also present a model of a “naïve” retailer that does not incorporate learning from early sales into its pricing process. This leads to an interesting question: Is it better for a retailer to become sophisticated (capable of learning), when facing strategic consumers?


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