Open Access
2016 Pricing Strategy versus Heterogeneous Shopping Behavior under Market Price Dispersion
Francisco Álvarez, José-Manuel Rey, Raúl G. Sanchis
Abstr. Appl. Anal. 2016(SI1): 1-8 (2016). DOI: 10.1155/2016/3254240


We consider the ubiquitous problem of a seller competing in a market of a product with dispersed prices and having limited information about both his competitors’ prices and the shopping behavior of his potential customers. Given the distribution of market prices, the distribution of consumers’ shopping behavior, and the seller’s cost as inputs, we find the computational solution for the pricing strategy that maximizes his expected profits. We analyze the seller’s solution with respect to different exogenous perturbations of parametric and functional inputs. For that purpose, we produce synthetic price data using the family of Generalized Error Distributions that includes normal and quasiuniform distributions as particular cases, and we also generate consumers’ shopping data from different behavioral assumptions. Our analysis shows that, beyond price mean and dispersion, the shape of the price distribution plays a significant role in the seller’s pricing solution. We focus on the seller’s response to an increasing diversity in consumers’ shopping behavior. We show that increasing heterogeneity in the shopping distribution typically lowers seller’s prices and expected profits.


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Francisco Álvarez. José-Manuel Rey. Raúl G. Sanchis. "Pricing Strategy versus Heterogeneous Shopping Behavior under Market Price Dispersion." Abstr. Appl. Anal. 2016 (SI1) 1 - 8, 2016.


Received: 8 August 2016; Accepted: 10 November 2016; Published: 2016
First available in Project Euclid: 25 January 2017

zbMATH: 06929360
MathSciNet: MR3590295
Digital Object Identifier: 10.1155/2016/3254240

Rights: Copyright © 2016 Hindawi

Vol.2016 • No. SI1 • 2016
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