HEC Montréal, Canada, May 6 - 8, 2013

2013 Optimization Days

HEC Montréal, Canada, 6 — 8 May 2013

Schedule Authors My Schedule

MB9 Applications de la théorie des jeux en marketing / Game Theory Applications in Marketing

May 6, 2013 03:30 PM – 05:10 PM

Location: Dutailier International

Chaired by Sihem Taboubi

3 Presentations

  • 03:30 PM - 03:55 PM

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

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

    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.

  • 03:55 PM - 04:20 PM

    Cost-Reducing R&D with Free Spillovers and Price Competition in a Dynamic Duopoly

    • Fouad El Ouardighi, presenter, ESSEC Business School
    • Federico Pasin, HEC Montreal
    • Matan Shniderman, Bar-Ilan University

    The objective of this paper is to study the R&D investment and pricing strategies of two firms competing for consumer demand in a dynamic setup. A firm’s R&D is production cost-reducing and can benefit the rival firm without payment. We consider decisions that follow from symmetric noncooperative equilibria, that is, Nash equilibria. In such a dynamic game, a player’s action can be based on the information on the current time t solely (open-loop strategy), or it can also include the information on the current value of the state vector if it is available (closed-loop strategy). The purpose of this paper is to compare open-loop and closed-loop strategies to determine the extent to which they affect the pricing and R&D investment decisions and the payoffs of the competitors in the presence of free spillovers.

  • 04:20 PM - 04:45 PM

    Pricing Optimal Contingent Products in Marketing Channels

    • Sihem Taboubi, presenter, GERAD - HEC Montréal
    • Peter M. Kort, Tilburg University
    • Georges Zaccour, Chair in Game Theory and Management, GERAD and HEC Montréal

    This paper studies the pricing strategies of firms belonging to a vertical channel structure where optional contingent products are sold. Optional contingent products are characterized by unilateral demand interdependencies. That is, the base product can be used independently of a contingent product. On the other hand, the contingent product's purchase is conditional on the possession of the base product.

    We aim to examine the optimality of loss-leader pricing in a context where the interdependent products are controlled by different firms located at two levels of the distribution channel and to investigate the impact of competition at the contingent product's market.

    The problem is modeled as a game played between a manufacturer and a (two) retailer(s). The manufacturer controls the transfer price while one of the retailer(s) control(s) the base product's retail price. Under both the monopoly case and the competitive case, the retailer(s) control(s) the contingent product's retail price and the manufacturer is considered as the channel leader.