Optimal worst-case pricing for a logit demand model with network effects

Chenhao Du, William L. Cooper, Zizhuo Wang

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We consider optimal pricing problems for a product that experiences network effects. Given a price, the sales quantity of the product arises as an equilibrium, which may not be unique. In contrast to previous studies that take a best-case view when there are multiple equilibrium sales quantities, we maximize the seller's revenue assuming that the worst-case equilibrium quantity will arise in response to a chosen price. We compare the best- and worst-case solutions, and provide asymptotic analysis of revenues.

Original languageEnglish (US)
Pages (from-to)345-351
Number of pages7
JournalOperations Research Letters
Volume46
Issue number3
DOIs
StatePublished - May 2018

Bibliographical note

Funding Information:
This material is based upon work supported by the National Science Foundation under Grant Number CMMI 1462676 .

Publisher Copyright:
© 2018 The Authors

Keywords

  • Choice model
  • Network effect
  • Pricing
  • Revenue management

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