Optimal worst-case pricing for a logit demand model with network effects |
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Authors: | Chenhao Du William L. Cooper Zizhuo Wang |
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Affiliation: | Department of Industrial and Systems Engineering, University of Minnesota, 111 Church Street SE, Minneapolis, MN 55455, USA |
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Abstract: | We consider optimal pricing problems for a product that experiences network effects. Given a price, the sales quantity of the product arises as an equilibrium, which may not be unique. In contrast to previous studies that take a best-case view when there are multiple equilibrium sales quantities, we maximize the seller’s revenue assuming that the worst-case equilibrium quantity will arise in response to a chosen price. We compare the best- and worst-case solutions, and provide asymptotic analysis of revenues. |
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Keywords: | Pricing Choice model Network effect Revenue management |
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