Pricing and Capacity Allocation in Opaque Selling

Zihao Zhang and Mengying Zhang

European Journal of Operational Research, 2024, vol. 318, issue 1, 230-241

Abstract: To solve the supply and demand mismatch problem, intermediaries have emerged as an opaque channel for service providers to dispose of leftover capacity. This paper focuses on pricing and capacity allocation in opaque selling. We develop a Stackelberg game model, where two capacity-constrained service providers first decide the capacity allocated to an intermediary who then determines the opaque price based on its capacity. We examine the conditions under which the service providers should cooperate with the intermediary, and find that the opaque price and capacity allocation decisions are affected by product type, service providers’ capacity, and commission rate. Moreover, we find that the service providers may fall into the prisoner's dilemma when distributing through the intermediary. It indicates that although opaque selling can bring service providers more profit, it may not help them achieve the optimal profit. In view of this, we propose an alliance policy to eliminate the prisoners’ dilemma and examine when the service providers should ally. Results show that this policy can improve the profits of the service providers and the whole supply chain if the commission rate is adequately low. Our findings suggest that opaque selling can be less beneficial than previously shown and demonstrate the importance of an alliance policy.

Keywords: OR in marketing; Opaque selling; Pricing; Capacity management; Alliance (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221724003783
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:318:y:2024:i:1:p:230-241

DOI: 10.1016/j.ejor.2024.05.022

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().