Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 288, Issue 2, Pages 539-551Publisher
ELSEVIER
DOI: 10.1016/j.ejor.2020.06.004
Keywords
Revenue management; Dynamic pricing; Multiple distribution channels; Channel control
Funding
- National Natural Science Foundation of China [71672160, 71201140, 71802161]
- China Scholarship Council [201906985003]
- Fundamental Research Funds for the Central Universities of China [20720171015]
Ask authors/readers for more resources
This study examines the impact of dynamic channel control and pricing on the distribution of a single perishable product through multiple channels, using stylized linear functions and two types of commissions to analyze dependent demand flows from different channels. It is found that the magnitude of the opportunity cost of capacity uniquely determines the optimal channel control strategy and pricing decisions.
This paper studies dynamic channel control and pricing of a single perishable product distributed through multiple channels with the objective of maximizing the total expected profit over a finite horizon. We consider two types of commissions, namely proportional and fixed commissions, on the third-party channels and utilize stylized linear functions to characterize dependent demand flows from different channels. We show that, the magnitude of the opportunity cost of capacity uniquely determines the optimal channel control, at any given inventory level and periods to go. Consequently, we are able to derive the optimal price offered on each channel as a function of the opportunity cost of capacity in closed form. This significantly reduces the computational complexity of the stochastic dynamic program when parameters are constant with time. When channels are independent, we provide a necessary and sufficient condition for the optimality of a nested channel control policy by commission rates. The same condition is also sufficient for the optimality of the nested channel control policy in a distribution system with two dependent channels. We then characterize the structural properties of the optimal pricing and channel control policies. Finally, we explore the impact of the substitution effect on the channel control through numerical studies and gain managerial insights. (C) 2020 Elsevier B.V. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available