Price Competition in the Random Coefficient Attraction Choice Models with Linear Cost

doi:10.1007/s40305-021-00366-5

Journal of the Operations Research Society of China ›› 2022, Vol. 10 ›› Issue (3): 623-658.doi: 10.1007/s40305-021-00366-5

收稿日期:2021-01-28 修回日期:2021-06-21 出版日期:2022-09-30 发布日期:2022-09-06

Price Competition in the Random Coefficient Attraction Choice Models with Linear Cost

Xiao-Yi Feng¹, Yang-Yang Xie², Hou-Min Yan³

1. Department of Model Risk Management, The Hongkong and Shanghai Banking Corporation Limited, Hong Kong, China;
2. International Institute of Finance, School of Management, University of Science and Technology of China, Hefei 230026, Anhui, China;
3. Department of Management Sciences, College of Business, City University of Hong Kong, Hong Kong, China

Received:2021-01-28 Revised:2021-06-21 Online:2022-09-30 Published:2022-09-06
Contact: Yang-Yang Xie,Xiao-Yi Feng,Hou-Min Yan E-mail:xieyclio@ustc.edu.cn;fengxy@amss.ac.cn;houminyan@cityu.edu.hk
Supported by:
This work was partially supported by the National Natural Science Foundation of China (No.72001198 and Nos.71991464/71991460),the Fundamental Research Funds for the Central Universities (No.WK2040000027),the National Key R&D Program of China (Nos.2020AAA0103804/2020AAA0103800),USTC (University of Science and Technology of China) Research Funds of the Double First-Class Initiative (No.YD2040002004),Collaborative Research Fund (No.C1143-20G),and General Research Fund (No.115080/17).

摘要/Abstract

Abstract: We study the pricing game between competing retailers under various random coefficient attraction choice models.We characterize existence conditions and structure properties of the equilibrium.Moreover,we explore how the randomness and cost parameters affect the equilibrium prices and profits under multinomial logit (MNL),multiplicative competitive interaction (MCI) and linear attraction choice models.Specifically,with bounded randomness,for the MCI and linear attraction models,the randomness always reduces the retailer's profit.However,for the MNL model,the effect of randomness depends on the product's value gap.For high-end products (i.e.,whose value gap is higher than a threshold),the randomness reduces the equilibrium profit,and vice versa.The results suggest high-end retailers in MNL markets exert more effort in disclosing their exact product performance to consumers.We also reveal the effects of randomness on retailers'pricing decisions.These results help retailers in making product performance disclosure and pricing decisions.

Key words: Pricing game, Random coefficient choice models, Equilibrium existence, Effects of randomness

中图分类号:

91-10

. [J]. Journal of the Operations Research Society of China, 2022, 10(3): 623-658.

Xiao-Yi Feng, Yang-Yang Xie, Hou-Min Yan. Price Competition in the Random Coefficient Attraction Choice Models with Linear Cost[J]. Journal of the Operations Research Society of China, 2022, 10(3): 623-658.

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Price Competition in the Random Coefficient Attraction Choice Models with Linear Cost

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