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Dynamic pricing with constant demand elasticity

McAfee, R. Preston and te Velde, Vera (2008) Dynamic pricing with constant demand elasticity. Production and Operations Management, 17 (4). pp. 432-438. ISSN 1059-1478.

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The model of Gallego and van Ryzin (1994) is specialized to the case of constant elasticity of demand. A closed form is developed, which has an even simpler form than that arising with exponential demand, and possesses an excellent approximation. It is shown in this environment that monopoly is efficient, which means that all the behavior usually attributed to monopoly pricing is actually a consequence of efficient pricing and would arise even in a perfectly competitive environment. If the initial supply is not too large, it is shown that consumers have no incentive to delay their purchases in order to get a lower price at the average inventory prevailing at any time.

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Additional Information:Available under Creative Commons Attribution license. Author's final version as submitted. Appendix:Proofs. Also available from the author's website
Subject Keywords:revenue management; yield management; dynamic pricing; efficient pricing
Issue or Number:4
Record Number:CaltechAUTHORS:MCApom08
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Usage Policy:Available under Creative Commons Attribution license.
ID Code:12369
Deposited By: Judith J Nollar
Deposited On:25 Nov 2008 00:07
Last Modified:03 Oct 2019 00:27

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