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Seminar
Department of Systems Engineering and Engineering Management
The Chinese
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Title |
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Advance Selling when Consumers Regret |
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Speaker |
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Prof. Javad Nasiry |
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Information Systems, Business Statistics and Operations
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HKUST |
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Date |
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Dec 3rd, 2010 (Friday) |
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Time |
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4:30 p.m. - 5:30 p.m. |
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Venue |
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Room 513 |
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William M.W. Mong Engineering Building |
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(Engineering Building Complex Phase 2) |
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CUHK |
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Abstract:
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We characterize
the effect of anticipated regret on consumer decisions, firm profits and
policies, in an advance selling context where buyers have uncertain
valuations. Advance purchases trigger action regret if valuations turn out to
be lower than the price paid, otherwise delaying purchase may cause inaction
regret. Emotionally rational consumers act strategically in response to the
firm's policies and in anticipation of regret. We characterize a regret
threshold above which firms should only spot sell to homogeneous markets,
otherwise advance selling is optimal. In such markets, we show that regret
lowers the profitability of booking limits. In heterogeneous markets, the
seller offers the product in both periods, using regret as a segmentation
mechanism, which may lead to optimal premium advance selling policies. The
effect of regret on profits depends on the type of regret, market structure
and the firm's pricing power. Action regret lowers the optimal profits of a
price-setting firm in homogeneous markets, while inaction regret has the
opposite effect. Overall, regret adversely affects optimal profits whenever
actions are regretted more than inactions. In this case, we show that refunds
and resales can be applied to mitigate regret and increase optimal profits.
Otherwise, firms benefit from regret by creating a buying frenzy, where
consumers advance purchase at negative economic surplus. Our results
emphasize the importance of assessing the uncertainty underlying customer
valuations, measuring the relative strength of action and inaction regrets,
and estimating the correlation between valuation and
regret to characterize the firm optimal policy. |
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Biography:
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Javad joined HKUST
in August 2010 as an assistant professor in Information Systems, Business
Statistics and Operations Management (ISOM) department. He completed his
Ph.D. at INSEAD, France where he concentrated on Pricing and Revenue
Management with Behavioral considerations. As such his research overlaps
marketing (consumer behavior theory) and operations management. A minor
stream of his research focuses on supply chain coordination issues in
healthcare supply chains. Javad holds an MBA and an undergraduate degree in
industrial engineering from Sharif University of Technology, |
************************* ALL ARE WELCOME ************************
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Host |
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Prof. Houmin Yan |
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Tel |
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(852)2609-8329 |
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Enquiries |
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Prof. Nan Chen or Prof. Sean X. Zhou |
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Department of Systems Engineering and Engineering
Management |
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CUHK |
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Website |
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Email |
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