Dynamic pricing when consumers have real options

Hamed Ghoddusi (), Alexander Rodivilov () and Baran Siyahhan ()
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Hamed Ghoddusi: Orfalea College of Business, California Polytechnic State University, San Luis Obispo, USA
Alexander Rodivilov: Faculty of Arts and Social Sciences, Sabanci University, Istanbul, Turkey
Baran Siyahhan: UCL - Université catholique de Lille, LITL - Laboratoire Interdisciplinaire des transitions de Lille - UCL FGES - Université Catholique de Lille - Faculté de gestion, économie et sciences - ICL - Institut Catholique de Lille - UCL - Université catholique de Lille - JUNIA - JUNIA - UCL - Université catholique de Lille

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Abstract: We study optimal dynamic pricing under uncertainty in a platform ecosystem subject to technological uncertainty. We highlight that users joining the platform before the full development of the complementary goods and services obtain real options to benefit from future improvements in platform quality and network effects. The platform owner influences the network effects and equilibrium outcomes through its dynamic price policy that trades off building an earlier consumer base versus extracting rents from early adopters. A price-skimming policy is optimal when the cost of developing a complementary good is small. Interestingly, price-skimming becomes optimal when the development cost is high, as long as the value of the improved platform is either small or relatively high. For intermediate values, however, the platform adopts a pricepenetration policy. Our paper provides new insights for building markets subject to the network effect under uncertainty.

Keywords: Platforms; Real; Options; Dynamic; Pricing; Uncertainty (search for similar items in EconPapers)
Date: 2025-09
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Published in European Journal of Operational Research, 2025, ⟨10.1016/j.ejor.2025.09.034⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05422256

DOI: 10.1016/j.ejor.2025.09.034

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