Rational shopping behavior and the option value of variable pricing
Article Abstract:
A study was conducted to analyze a normative framework showing how rational customers should shop during random product prices. A closed-form expression for the optimal purchasing policy was determined. It was shown that the optimal quantity to acquire under a given price situation is linearly decreasing during variations between the price under that scenario and the average price. The correlation between purchase flexibility resulting from price variability and shopping frequency was also examined. In addition, model implications were evaluated using multicategory scanner panel information from housings and pricing data for three stores. Results indicated that rational customers incur a lower level of expenditure at the store with a higher price variability if two stores charge the same median price for a product.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1998
User Contributions:
Comment about this article or add new information about this topic:
The dynamic line allocation problem
Article Abstract:
The Dynamic Line Allocation (DLA) problem pertaining to the determination of line allocations most efficient in reducing changeover and waiting expenses was considered. A model of the DLA problem for a single manufacturing plant was developed. Because of the problem's complexity, three heuristic procedures were designed for estimating near-optimal solutions. These three procedures were the Lagrangian heuristic, approximation heuristic and rounding heuristic. Results of computational experiments showed that the Lagrangian heuristic procedure was the best of the three methods, generating some 20 viable solutions to the DLA problem while the other two heuristics gave rise to only one feasible solution.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1992
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: Information cost and innovation adoption policies. Towards a heuristic theory of problem structuring
- Abstracts: Dividend spreads. Dividend behavior for the aggregate stock market. Changes in the Standard and Poor's 500 list
- Abstracts: New organizational forms for enhancing innovation: the case of internal corporate joint ventures
- Abstracts: Optimal service speeds in a competitive environment. Optimal operating policies in the presence of exchange rate variability
- Abstracts: User delay costs and internal pricing for a service facility. Information and organization for horizontal multimarket coordination