4 Presentations

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  10:30 AM - 11:00 AM

  A New Services Adoption Model with Customer Acquisition and Retention Expenditures

  • Tarek Ben Rhouma, presenter, GERAD - HEC-Montréal
  • Georges Zaccour, Chair in Game Theory and Management, GERAD and HEC Montréal

  This paper introduces a framework for modeling services diffusion that includes customer acquisition and retention expenditures. The growth of a new service is characterized by two processes: customer acquisition process and customer attrition process. Optimal strategies of customer acquisition and retention spending are analyzed, and an estimation of the model using real data is reported.

• 
  11:00 AM - 11:30 AM

  Pricing Strategies of Complementary Products in Distribution Channels: A Dynamic Approach

  • Sihem Taboubi, GERAD - HEC Montréal
  • Fabien Ngendakuriyo, presenter, GERAD

  Most of the literature on the issue of pricing in vertical channel structures examined either the case of a unique product sold in a bilateral monopoly, or the case of substitute products sold in competitive channels. In this paper, we investigate the dynamic pricing strategies of firms in a distribution channel where a unique retailer sells two products that could be substitutes or complements. The diffusion of each product evolves according to a differential equation that captures the impact of its cumulative sales and the retail prices of both products on its adoption rate.
  We consider that the retailer could behave in a myopic or a farsighted manner. A myopic retailer maximizes its instantaneous profit without taking into account the diffusion of products. The literature on pricing in bilateral monopolies proved that the retailer fixes higher retail prices and loses profits when he cats in a myopic manner (Jørgensen and Zaccour, 2004). In competitive channels, there are some conditions under which the retailer’s myopic behavior could be a strategic choice.
  In this paper, we want to examine the impact of retailer’s myopia on the pricing strategies, the diffusion, and channel members’ profits when the retailer handles complementary products, and compare these results to the case where these products are substitutes.

• 
  11:30 AM - 12:00 PM

  Operations and Marketing Equilibrium Strategies under Wholesale Price and Revenue Sharing Contracts in a Dynamic Vertical Channel

  • Fouad El Ouardighi, presenter, ESSEC Business School
  • Gary Erickson, University of Washington
  • Dieter Grass, Vienna Technical University
  • Steffen Jorgensen, Odense University

  The objective in this paper is to study the relative merits of two specific contracts, the wholesale price and the revenue sharing contract in a dynamic setup, a differential game of a stylized vertical channel consisting of a manufacturer and a single retailer. We focus on the production and sales of a single product and suggest a dynamic model that includes key operational and marketing activities in the marketing channel. We consider decisions that follow from symmetric noncooperative equilibria, that is, Nash equilibria. In such a dynamic game, there are broadly two different strategies that are available to the vertical channel participants, that is, open-loop and feedback Nash equilibrium strategies. We wish to study how the choice of strategy affects decisions and payoffs of the vertical channel members under wholesale price and revenue sharing contracts.

• 
  12:00 PM - 12:30 PM

  A Cournot-Nash-Bertrand Game Theory Model of a Service-Oriented Internet with Price and Quality Competition Among Network Transport Providers

  • Anna Nagurney, presenter, Isenberg School of Management
  • Tilman Wolf, Department of Electrical and Computer Engineering, College of Engineering, University of Massachusetts, Amherst, Massachusetts

  This paper develops a game theory model of a service-oriented Internet in which profit-maximizing service providers provide substitutable (but not identical) services and compete with the quantities of services in a Cournot-Nash manner, whereas the network transport providers, which transport the services to the users at the demand markets, and are also profit-maximizers, compete with prices in Bertrand fashion and on quality. The consumers respond to the composition of service and network provision through the demand price functions, which are both quantity and quality dependent. We derive the governing equilibrium conditions of the integrated game and show that it satisfies a variational inequality problem. We then describe the underlying dynamics, and provide some qualitative properties, including stability analysis. The proposed algorithmic scheme tracks, in discrete-time, the dynamic evolution of the service volumes, quality levels, and the prices until an approximation of a stationary point (within the desired convergence tolerance) is achieved. Numerical examples demonstrate the modeling and computational framework.