scholarly journals Dynamic Pricing for Airline Revenue Management under Passenger Mental Accounting

2015 ◽  
Vol 2015 ◽  
pp. 1-8 ◽  
Author(s):  
Yusheng Hu ◽  
Jinlin Li ◽  
Lun Ran
Keyword(s):  
Decision Making ◽  
Dynamic Pricing ◽  
Mental Accounting ◽  
Dynamic Programming Method ◽  
Optimal Pricing ◽  
Decision Making Process ◽  
Pricing Strategies ◽  
Human Decision ◽  
Pricing Problems ◽  
Positive Effect

Mental accounting is a far-reaching concept, which is often used to explain various kinds of irrational behaviors in human decision making process. This paper investigates dynamic pricing problems for single-flight and multiple flights settings, respectively, where passengers may be affected by mental accounting. We analyze dynamic pricing problems by means of the dynamic programming method and obtain the optimal pricing strategies. Further, we analytically show that the passenger mental accounting depth has a positive effect on the flight’s expected revenue for the single flight and numerically illustrate that the passenger mental accounting depth has a positive effect on the optimal prices for the multiple flights.

scholarly journals The Achilles tendon of dynamic pricing –– the effect of consumers' fairness preferences on platform's dynamic pricing strategies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yong Wang ◽  
Tianze Tang ◽  
Weiyi Zhang ◽  
Zhen Sun ◽  
Qiaoqin Xiong
Keyword(s):  
Decision Making ◽  
Dynamic Pricing ◽  
Design Methodology ◽  
Repeated Game ◽  
Decision Making Process ◽  
Pricing Strategies ◽  
Content Type ◽  
Fair Game ◽  
Game Dynamic ◽  
Repeated Game Theory

PurposeIn this paper, the authors study the effect of consumers' fairness preferences on dynamic pricing strategies adopted by platforms in a non-cooperative game.Design/methodology/approachThis study applies fair game and repeated game theory.FindingsThis study reveals that, in a one-shot game, if consumers have fairness preferences, dynamic prices will slightly decline. In a repeated game, dynamic prices will be reduced even when consumers do not have fairness preferences. When fairness preferences and repeated game are considered simultaneously, dynamic prices are most likely to be set at fair prices. The authors also discuss the effect of platforms' discounting factors, the consumers' income and alternative choices of consumption on the dynamic prices.Research limitations/implicationsThe study findings illustrate the importance of incorporating behavioral elements in understanding and designing the dynamic pricing strategies for platforms and the implications on social welfare in general.Originality/valueThe authors developed a theoretical model to incorporate consumers' fairness preference into the decision-making process of platforms when they design the dynamic pricing strategies.

scholarly journals Pricing Strategies of Logistics Distribution Services for Perishable Commodities

Algorithms ◽  
2018 ◽  
Vol 11 (11) ◽  
pp. 186
Author(s):  
Tao Li ◽  
Yan Chen ◽  
Taoying Li
Keyword(s):  
Dynamic Pricing ◽  
Consumer Satisfaction ◽  
Service Providers ◽  
Time Constraints ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Pricing Model ◽  
Logistics Service ◽  
Distribution Services ◽  
Perishable Goods

The problem of pricing distribution services is challenging due to the loss in value of product during its distribution process. Four logistics service pricing strategies are constructed in this study, including fixed pricing model, fixed pricing model with time constraints, dynamic pricing model, and dynamic pricing model with time constraints in combination with factors, such as the distribution time, customer satisfaction, optimal pricing, etc. By analyzing the relationship between optimal pricing and key parameters (such as the value of the decay index, the satisfaction of consumers, dispatch time, and the storage cost of the commodity), it is found that the larger the value of the attenuation coefficient, the easier the perishable goods become spoilage, which leads to lower distribution prices and impacts consumer satisfaction. Moreover, the analysis of the average profit of the logistics service providers in these four pricing models shows that the average profit in the dynamic pricing model with time constraints is better. Finally, a numerical experiment is given to support the findings.

OPTIMAL PRICING AND PRODUCTION POLICIES OF A MAKE-TO-STOCK SYSTEM WITH FLUCTUATING DEMAND

2009 ◽  
Vol 23 (2) ◽  
pp. 205-230 ◽  
Author(s):  
Jean-Philippe Gayon ◽  
Işılay Talay-Değirmenci ◽  
Fikri Karaesmen ◽  
E. Lerzan Örmeci
Keyword(s):  
Dynamic Pricing ◽  
Numerical Study ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Pricing Policy ◽  
Stock Level ◽  
Production Inventory ◽  
Static Pricing ◽  
Make To Stock ◽  
Production Inventory System

We study the effects of different pricing strategies available to a production–inventory system with capacitated supply, which operates in a fluctuating demand environment. The demand depends on the environment and on the offered price. For such systems, three plausible pricing strategies are investigated: static pricing, for which only one price is used at all times, environment-dependent pricing, for which price changes with the environment, and dynamic pricing, for which price depends on both the current environment and the stock level. The objective is to find an optimal replenishment and pricing policy under each of these strategies. This article presents some structural properties of optimal replenishment policies and a numerical study that compares the performances of these three pricing strategies.

scholarly journals PathGame: Crowdsourcing Time-Constrained Human Solutions for the Travelling Salesperson Problem

2019 ◽  
Vol 2019 ◽  
pp. 1-9
Author(s):  
Slaviša Dumnić ◽  
Đorđije Dupljanin ◽  
Vladimir Božović ◽  
Dubravko Ćulibrk
Keyword(s):  
Decision Making ◽  
Online Games ◽  
Initial Study ◽  
Decision Making Process ◽  
Human Decision ◽  
Travelling Salesperson Problem

Human strategies for solving the travelling salesperson problem (TSP) continue to draw the attention of the researcher community, both to further understanding of human decision-making and inspiration for the design of automated solvers. Online games represent an efficient way of collecting large amounts of human solutions to the TSP, and PathGame is a game focusing on non-Euclideanclosed-form TSP. To capture the instinctive decision-making process of the users, PathGame requires users to solve the problem as quickly as possible, while still favouring more efficient tours. In the initial study presented here, we have used PathGame to collect a dataset of over 16,000 tours, containing over 22,000,000 destinations. Our analysis of the data revealed new insights related to ways in which humans solve TSP and the time it takes them when forced to solve TSPs of large complexity quickly.

scholarly journals Effects of a Social Robot's Autonomy and Group Orientation on Human Decision-Making

2013 ◽  
Vol 2013 ◽  
pp. 1-13 ◽  
Author(s):  
Pei-Luen Patrick Rau ◽  
Ye Li ◽  
Jun Liu
Keyword(s):  
College Students ◽  
Decision Making ◽  
Laboratory Experiment ◽  
Social Robot ◽  
Decision Making Process ◽  
Robot Design ◽  
Group Orientation ◽  
Intelligent Robots ◽  
Robot Systems ◽  
Human Decision

Social attributes of intelligent robots are important for human-robot systems. This paper investigates influences of robot autonomy (i.e., high versus low) and group orientation (i.e., ingroup versus outgroup) on a human decision-making process. We conducted a laboratory experiment with 48 college students and tested the hypotheses with MANCOVA. We find that a robot with high autonomy has greater influence on human decisions than a robot with low autonomy. No significant effect is found on group orientation or on the interaction between group orientation and autonomy level. The results provide implications for social robot design.

scholarly journals Dynamic Pricing Based on Strategic Consumers and Substitutes in a Duopoly Setting

2014 ◽  
Vol 2014 ◽  
pp. 1-9
Author(s):  
Gongbing Bi ◽  
Lechi Li ◽  
Feng Yang ◽  
Liang Liang
Keyword(s):  
Decision Making ◽  
Nash Equilibrium ◽  
Product Differentiation ◽  
Dynamic Pricing ◽  
Dynamic Game ◽  
Solution Concept ◽  
Expected Value ◽  
Decision Making Process ◽  
Pricing Model ◽  
Strategic Consumers

Based on the rational strategic consumers, we construct a dynamic game to build a two-period dynamic pricing model for two brands of substitutes which are sold by duopoly. The solution concept of the dynamic game is Nash equilibrium. In our model, consumers have been clearly segmented into several consumption classes, according to their expected value of the products. The two competing firms enter a pricing game and finally reach the state of Nash equilibrium. In addition, decision-making process with only myopic consumers existing in the market is analyzed. To make the paper more practical and realistic, the condition, in which the myopic and strategic consumers both exist in the market, is also considered and studied. In order to help the readers understand better and make it intuitively more clearly, a numerical example is given to describe the influence of the main parameters to the optimal prices. The result indicates that, to maintain the firms’ respective optimal profits, the prices of the products should be adjusted appropriately with the changes of product differentiation coefficient.

scholarly journals Stochastic representation decision theory: How probabilities and values are entangled dual characteristics in cognitive processes

PLoS ONE ◽  
2020 ◽  
Vol 15 (12) ◽  
pp. e0243661
Author(s):  
Giuseppe M. Ferro ◽  
Didier Sornette
Keyword(s):  
Decision Making ◽  
Decision Maker ◽  
Time Pressure ◽  
Rational Expectation ◽  
Weighting Function ◽  
Objective Probability ◽  
Decision Making Process ◽  
Stochastic Representation ◽  
Human Decision ◽  
Expectation Theory

Humans are notoriously bad at understanding probabilities, exhibiting a host of biases and distortions that are context dependent. This has serious consequences on how we assess risks and make decisions. Several theories have been developed to replace the normative rational expectation theory at the foundation of economics. These approaches essentially assume that (subjective) probabilities weight multiplicatively the utilities of the alternatives offered to the decision maker, although evidence suggest that probability weights and utilities are often not separable in the mind of the decision maker. In this context, we introduce a simple and efficient framework on how to describe the inherently probabilistic human decision-making process, based on a representation of the deliberation activity leading to a choice through stochastic processes, the simplest of which is a random walk. Our model leads naturally to the hypothesis that probabilities and utilities are entangled dual characteristics of the real human decision making process. It predicts the famous fourfold pattern of risk preferences. Through the analysis of choice probabilities, it is possible to identify two previously postulated features of prospect theory: the inverse S-shaped subjective probability as a function of the objective probability and risk-seeking behavior in the loss domain. It also predicts observed violations of stochastic dominance, while it does not when the dominance is “evident”. Extending the model to account for human finite deliberation time and the effect of time pressure on choice, it provides other sound predictions: inverse relation between choice probability and response time, preference reversal with time pressure, and an inverse double-S-shaped probability weighting function. Our theory, which offers many more predictions for future tests, has strong implications for psychology, economics and artificial intelligence.

How the Brain Makes Decisions

2020 ◽  
Author(s):  
Thomas Boraud
Keyword(s):  
Decision Making ◽  
General Framework ◽  
Fundamental Question ◽  
Decision Making Process ◽  
Brain Functions ◽  
It Impacts ◽  
Combining Data ◽  
Neural Substrate ◽  
Human Decision ◽  
The Brain

The human decision-making process is tainted with irrationality. To address this issue, this book proposes a ‘bottom-up’ approach of the neural substrate of decision-making, starting from the fundamental question: What are the basic properties that a neural network of decision-making needs to possess? Combining data drawn from phylogeny and physiology, this book provides a general framework of the neurobiology of decision-making in vertebrates and explains how it evolved from the lamprey to the apes. It also addresses the consequences, examining how it impacts our capacity of reasoning and some aspects of the pathophysiology of high brain functions. To conclude, the text opens discussion to more philosophical concepts such as the question of free will.

Decision-Making Cognitive Process

2018 ◽  
Vol 3 (1) ◽  
pp. 1-12
Author(s):  
Thais Spiegel ◽  
Ana Carolina P V Silva
Keyword(s):  
Decision Making ◽  
Cognitive Process ◽  
Decision Makers ◽  
Time Constraints ◽  
Decision Making Process ◽  
Cognitive Limitations ◽  
The World ◽  
Human Decision ◽  
Per Se ◽  
Rationality Theory

In the study of decision-making, the classical view of behavioral appropriateness or rationality was challenged by neuro and psychological reasons. The “bounded rationality” theory proposed that cognitive limitations lead decision-makers to construct simplified models for dealing with the world. Doctors' decisions, for example, are made under uncertain conditions, as without knowing precisely whether a diagnosis is correct or whether a treatment will actually cure a patient, and often under time constraints. Using cognitive heuristics are neither good nor bad per se, if applied in situations to which they have been adapted to be helpful. Therefore, this text contextualizes the human decision-making perspective to find descriptions that adhere more closely to the human decision-making process. Then, based on a literature review of cognition during decision-making, particularly in healthcare context, it addresses a model that identifies the roles of attention, categorization, memory, emotion, and their inter-relations, during the decision-making process.

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