Date: April 17, 2014
Time: 10:30 am
Venue: Room 1004, Administration Building, Zijingang Campus
Speaker: Prof. Rachel Q. Zhang, Hong Kong University of Science and Technology
Topic: The Reference Effects on a Firm's Dynamic Pricing and Inventory Strategies with Strategic Consumers
Host: Prof. ZHOU Weihua, Associate Dean of ZJUSOM
Abstract: At the beginning of each season (stage 1), the firm places an order and sells the product at the full price. As the sales unfold, the firm has an opportunity to mark down the price (stage 2) to match supply with demand. However, the retailer's markdown strategies in past seasons give strategic consumers an incentive to time their purchases in future seasons. Specifically, consumers will learn from the retailer's past practice and form their expectation or reference on the markdown prices which will influence their purchasing decisions in future seasons. We characterize the properties of the optimal ordering and markdown decisions and show that markdowns, if adopted appropriately, do not necessarily destroy the stability of a business even in the presence of strategic consumers. Furthermore, when under optimal control, consumers'reference should fluctuate around a mean", referred to as mean-reverting, under certain conditions. We conduct numerical studies to investigate the impact of consumer learning in the presence of strategic consumers and various system parameters on the retailer's optimal strategies and profitability.
About the Speaker: Rachel Q. Zhang is Professor in Industrial Engineering and Logistics Management at the Hong Kong University of Science and Technology. She received her Ph.D. in Industrial Engineering and Management Sciences in 1994 from Northwestern University and was previously a faculty member in the Department of Industrial and Operations Engineering at University of Michigan, and the Johnson Graduate School of Management at Cornell University. Her research interests lie in the general area of operations management and the interface of operations, finance and marketing. Her research has appeared in such journals as Operations Research, Management Science, Interfaces, IIE Transactions, Naval Research Logistics, and Advances in Applied Probability.
