Paper Info
Title
Online Auction and List Price Revenue Management
Abstract
We analyze a revenue management problem in which a seller facing a Poisson arrival stream of consumers operates an online multiunit auction. Consumers can get the product from an alternative list price channel. We consider two variants of this problem: In the first variant, the list price is an external channel run by another firm. In the second one, the seller manages both the auction and the list price channels. Each consumer, trying to maximize his own surplus, must decide either to buy at the posted price and get the item at no risk, or to join the auction and wait until its end, when the winners are revealed and the auction price is disclosed. Our approach consists of two parts. First, we study structural properties of the problem, and show that the equilibrium strategy for both versions of this game is of the threshold type, meaning that a consumer will join the auction only if his arrival time is above a function of his own valuation. This consumer's strategy can be computed using an iterative algorithm in a function space, provably convergent under some conditions. Unfortunately, this procedure is computationally intensive. Second, and to overcome this limitation, we formulate an asymptotic version of the problem, in which the demand rate and the initial number of units grow proportionally large. We obtain a simple closed-form expression for the equilibrium strategy in this regime, which is then used as an approximate solution to the original problem. Numerical computations show that this heuristic is very accurate. The asymptotic solution culminates in simple and precise recipes of how bidders should behave, as well as how the seller should structure the auction, and price the product in the dual-channel case.
Year
DOI
Venue
2007
10.1287/mnsc.1060.0646
Management Science
Keywords
Field
DocType
online auction,dual channel,list price channel,revenue management,poisson arrival stream,list price,strategic behavior,auction price,equilibrium strategy,alternative list price channel,revenue management problem,asymptotic analysis,online multiunit auction,original problem,list price revenue management,posted price,iterative algorithm,function space,asymptotic,working paper
English auction,Economics,Mathematical economics,Mathematical optimization,Vickrey auction,Generalized second-price auction,Dutch auction,Auction theory,Multiunit auction,Reverse auction,Revenue equivalence
Journal
Volume
Issue
ISSN
53
5
0025-1909
Citations 
PageRank 
References 
31
2.44
12
Authors
2
Name
Order
Citations
PageRank
René Caldentey115714.93
Gustavo Vulcano238630.15