TECHNICAL NOTE---Revenue Management with Bargaining

Atul Bhandari () and Nicola Secomandi ()
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Atul Bhandari: SmartOps, Pittsburgh, Pennsylvania 15212
Nicola Secomandi: Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213

Operations Research, 2011, vol. 59, issue 2, 498-506

Abstract: Static game-theoretic models of bilateral bargaining assume that the seller knows his valuation for the item that is up for sale; that is, how the seller may determine this quantity is exogenous to these models. In this paper, we develop and analyze a stylized Markov decision process that endogenizes the seller's computation of his marginal inventory valuation in an infinite-horizon revenue management setting when each sale occurs according to a given bilateral bargaining mechanism. We use this model to compare, both analytically and numerically, the seller's performance under four basic bilateral bargaining mechanisms with a tractable information structure. These comparisons provide insights into the seller's performance under the following trading arrangements: buyer and seller posted pricing, negotiated pricing, and rule-based pricing.

Keywords: dynamic programming; Markov; finite state; games/group decisions; bargaining; incomplete information; mechanisms; neutral bargaining solution; marketing; pricing; revenue management; dynamic pricing; negotiated pricing (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:59:y:2011:i:2:p:498-506

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