TY - GEN

T1 - Demand models for the static retail price optimization problem-A Revenue Management perspective

AU - Kunz, Timo P.

AU - Crone, Sven F.

N1 - Copyright: Copyright 2014 Elsevier B.V., All rights reserved.

PY - 2014/5/4

Y1 - 2014/5/4

N2 - Revenue Management (RM) has been successfully applied to many industries and to various problem settings. While this is well reflected in research, RM literature is almost entirely focused on the dynamic pricing problem where a perishable product is priced over a finite selling horizon. In retail however, the static case, in which products are continuously replenished and therefore virtually imperishable is equally relevant and features a unique set of industry-specific problem properties. Different aspects of this problem have been discussed in isolation in various fields. The relevant contributions remain therefore scattered throughout Operations Research, Econometrics, and foremost Marketing and Retailing while a holistic discussion is virtually non-existent. We argue that RM with its interdisciplinary, practical, and systemic approach would provide the ideal framework to connect relevant research across fields and to narrow the gap between theory and practice. We present a review of the static retail pricing problem from an RM perspective in which we focus on the demand model as the core of the retail RM system and highlight its links to the data and the optimization model. We then define five criteria that we consider critical for the applicability of the demand model in the retail RM context. We discuss the relevant models in the light of these criteria and review literature that has connected different aspects of the problem. We identify several avenues for future research to illustrate the vast potential of discussing the static retail pricing problem in the RM context.

AB - Revenue Management (RM) has been successfully applied to many industries and to various problem settings. While this is well reflected in research, RM literature is almost entirely focused on the dynamic pricing problem where a perishable product is priced over a finite selling horizon. In retail however, the static case, in which products are continuously replenished and therefore virtually imperishable is equally relevant and features a unique set of industry-specific problem properties. Different aspects of this problem have been discussed in isolation in various fields. The relevant contributions remain therefore scattered throughout Operations Research, Econometrics, and foremost Marketing and Retailing while a holistic discussion is virtually non-existent. We argue that RM with its interdisciplinary, practical, and systemic approach would provide the ideal framework to connect relevant research across fields and to narrow the gap between theory and practice. We present a review of the static retail pricing problem from an RM perspective in which we focus on the demand model as the core of the retail RM system and highlight its links to the data and the optimization model. We then define five criteria that we consider critical for the applicability of the demand model in the retail RM context. We discuss the relevant models in the light of these criteria and review literature that has connected different aspects of the problem. We identify several avenues for future research to illustrate the vast potential of discussing the static retail pricing problem in the RM context.

KW - Demand modeling

KW - Pricing

KW - Retail

KW - Revenue Management

UR - http://www.scopus.com/inward/record.url?scp=84907074241&partnerID=8YFLogxK

U2 - 10.4230/OASIcs.SCOR.2014.101

DO - 10.4230/OASIcs.SCOR.2014.101

M3 - Conference contribution/Paper

AN - SCOPUS:84907074241

SN - 9783939897675

T3 - OpenAccess Series in Informatics

SP - 101

EP - 125

BT - 4th Student Conference on Operational Research, SCOR 2014

PB - Schloss Dagstuhl- Leibniz-Zentrum fur Informatik GmbH, Dagstuhl Publishing

T2 - 4th Student Conference on Operational Research, SCOR 2014

Y2 - 2 May 2014 through 4 May 2014

ER -