TY  - CHAP
A1  - Schlosser, Rainer
A1  - Boissier, Martin
ED  - Liberatore, Federico
ED  - Parlier, Greg H.
ED  - Demange, Marc
T1  - Optimal price reaction strategies in the presence of active and passive competitors
T2  - Proceedings of the 6th International Conference on Operations Research and Enterprise Systems - ICORES
N2  - Many markets are characterized by pricing competition. Typically, competitors are involved that adjust their prices in response to other competitors with different frequencies. We analyze stochastic dynamic pricing models under competition for the sale of durable goods. Given a competitor’s pricing strategy, we show how to derive optimal response strategies that take the anticipated competitor’s price adjustments into account. We study resulting price cycles and the associated expected long-term profits. We show that reaction frequencies have a major impact on a strategy’s performance. In order not to act predictable our model also allows to include randomized reaction times. Additionally, we study to which extent optimal response strategies of active competitors are affected by additional passive competitors that use constant prices. It turns out that optimized feedback strategies effectively avoid a decline in price. They help to gain profits, especially, when aggressive competitor s are involved.
KW  - Dynamic Pricing
KW  - Competition
KW  - Optimal Control
KW  - Response Strategies
KW  - Reaction Time
KW  - Price Cycles
Y1  - 2017
SN  - 978-989-758-218-9
U6  - https://doi.org/10.5220/0006118200470056
SP  - 47
EP  - 56
PB  - SCITEPRESS - Science and Technology Publications, Lda.
CY  - Setúbal
ER  -