You are here

Dissertations

Customer behavior in revenue management

Qian Liu, 2006
Faculty Advisor: Garrett van Ryzin

Abstract

This thesis examines several topics incorporating customer choice behavior, customer strategic behavior and switching costs effects into revenue management.

Motivated by Gallego et al. [32]'s choice-based deterministic linear programming model proposed recently, we extend the analysis of this model in the first essay. Using the notion of 'efficiency' developed by Talluri and van Ryzin [65], we show that only efficient sets are used in an optimal policy asymptotically. We develop a practical decomposition heuristic to dynamically generate control policies. Numerical examples show this heuristic significantly improves the performance of the static linear programming.

Two more essays address strategic purchase behavior when customers face different prices over time. We develop a stylized capacity rationing model, in which a firm can deliberately create shortages by under-stocking to induce early purchases at high prices. We show that a large number of high-value customers, risk aversion, large price differences over time and a low level of competition all tend to make rationing an optimal strategy.

Yet customers may not have fully rational expectations; instead, they may learn only through repeated experience. The second essay on this topic considers how a firm should use its capacity decision to profitably influence the customer learning process. We develop an adaptive learning model in which customers update expectations adaptively, and the firm's decision problem is imbedded in a dynamic program of capacity choices over time. We show that the market converges to either a rationing equilibrium or a low-price-only equilibrium. Indeed, a critical value of customer expectation determines which equilibrium is the long-run optimal outcome. We also show this equilibrium is the same as the rational expectation outcome when future profits are not discounted.

Finally, we examine switching costs effects on tactical pricing decisions, which are especially important in subscription and account-based services. There is a tradeoff between increasing revenue by charging current customers a high price versus pricing low to build for the future market share. We formulate an optimal pricing control model and show the optimal strategy is a simple 'target market share' policy. We also extend the analysis to a duopoly market.

Doctoral Program News

Honigsberg featured in Ideas at Work

The August issue of Ideas at Work features research that doctoral candidate Colleen Honigsberg led in conjunction with Sharon Katz.

Read More about Colleen

Wazlawek featured in Ideas at Work

Abbie Wazlawek's joint research with Professor Daniel Ames is featured in the June 24th, 2014 edition of Ideas at Work

Read More about Abbie

Ethan Rouen featured in Ideas at Work

Ethan Rouen's joint research with Professor Dan Amiram is featured in the May 15th, 2014 edition of Ideas at Work

Read More about Abbie

Rivas Wins Fellowship

The PhD program is proud to congratulate Miguel Duro Rivas, who was awarded the Nasdaq Educational Foundation Doctoral Dissertation Fellowship.

Read More about Miguel

Wong wins Deloitte Fellowship

We are proud to announce that Yu Ting (Forester) Wong is one of the recipients of the 2014 Deloitte Foundation Doctoral Fellowship in Accounting.

Read More About Yu Ting >

The PhD Program Congratulates John Yao

PhD student John Yao was a finalist in the 2013 M&SOM (Manufacturing & Service Operations Management) student paper competition.

Read More About John >

Honigsberg Named Postdoctoral Fellow

The PhD program is proud to congratulate Colleen Honigsberg, who was named the Postdoctoral Fellow in Corporate Governance at the Millstein Center at Columbia Law School in October 2013

Read More about Colleen >

 

Application Deadlines

Master of Science in Marketing >

For Fall 2015 Entry:
Deadline: December 15th, 2014

 

Master of Science in Financial Economics

For Fall 2015 Entry:
Deadline: December 15th, 2014

 

Master of Science in Management Science and Engineering

For Fall 2014 Entry:
Early Decision: Jan 6, 2014
Regular Decision: Feb 15, 2014

 

Apply Now
Sept 2015

Doctoral
Deadline: 01/05/15

MS Marketing
Deadline: 12/15/2014

MS Financial Economics
Deadline: 12/15/2014

MS Leadership
Rolling admission

Check Application Status

Students listening to classroom lecture

Once you've submitted your application, you can login and track your status by using the link below.

Check Status