Competitive Delivered Pricing by Mail-Order and Internet Retailers

Mail-order and internet sellers must decide how customers pay shipping charges. Typically, these sellers choose between two pricing policies: either “uniform pricing,” where the firm delivers to any customer at a fixed delivery charge (that may be volume dependent), or “mill pricing,” where the firm bills the customer a distance-related shipping charge. This paper studies price competition between a mail-order (or internet) seller and local retailers, and the mail-order firm’s choice of pricing policy. The price policy choice is studied when retailers do not change price in reaction to the mail-order firm’s policy choice, and when they do. In the second case, a two-stage non-cooperative game is used and it is found that for low customer willingness to pay, mill pricing is favored but as willingness to pay rises, uniform pricing becomes more attractive. These results are generalized showing that larger markets, higher transportation rates, higher unit production cost, and greater competition between retailers all increase profit under mill pricing relative to uniform pricing (and vice versa). On the other hand, cost asymmetries that favor the mail-order firm will tend to induce uniform rather than mill pricing. Some empirical data on retail and mail-order sales that confirm these results are presented.     

Analysis of two-tier public service systems under a government subsidy policy

Some public service systems such as healthcare systems consist of both free public service provider with a long wait time and paid private service provider with a short wait time. Such service systems are often called a two-tier service system. In general, more customers will choose the free service provider (SP). To reduce the congestion in the free system, the government may encourage customers to use the pay system by offering them a subsidy. This paper studies whether such a subsidy can reduce the free system’s waiting time and improves the social welfare. While the objective of the free system is to maximize its own total customers’ utility, the objective of the pay system is to maximize its profit. We develop a mixed duopoly game to analyze the Nash equilibrium for the competition between the free and toll systems. Two scenarios with unregulated and regulated prices are considered. When the pay system price is unregulated (the private SP can set prices freely), we find that if customers are less sensitive to the service delay, the subsidy policy can effectively reduce the expected waiting time for the free system and increase the customer utility surplus of the entire two-tier system. However, if customers are more sensitive to the service delay, the subsidy policy may have the opposite effect. When the pay system price is regulated (the price determined by government), the subsidy policy can effectively reduce the expected waiting time for the free system and improve the social welfare of the two-tier system. And there exists an optimal regulated price to maximize the social welfare of the entire public service system.     

网格计算环境下的ASP服务模型

随着新技术的不断涌现及企业对商业应用服务的需求目的，对ASP服务模型的探讨又活跃起来。采用技术对比的方法分析了网格环境下的P2P和web服务技术，指出了web服务技术能将各种分布的、异构的、由单一企业提供或者由各外部共享资源和应用服务提供商联合提供的动态服务整合起来的特性，得出了ASP的演化将由传统的一对多模式转向web服务的结论。最后结合具体的科研项目，提出了一种通用的ASP服务模型，还探讨了它在实际应用中的价值。     

Integrated capacity and marketing incentive contracting for capital-intensive service systems

Capacity investment and capacity allocation have always been critical management decisions, especially in the presence of agency issue for capital-intensive and congestion-prone service organizations. Prior research has often modeled only one aspect of the issue, such as proposing internal pricing scheme for capacity allocation ignoring demand uncertainty and the influence of the manager, optimizing capacity alone ignoring the agency issue, or incentive contract design ignoring capacity limit and service delay. We show that simply employing a traditional incentive contract (which often ignores service delays) for the manager responsible for promoting a center's services will provide incorrect incentives and lead to a more congested and less profitable system. When firms focus on optimizing operational capacity alone, ignoring the impact of managers on service demand, they are able to maintain the optimal utilization and service quality by balancing capacity and delay costs. However, they forgo profit-increasing opportunities, as they ignore the impact of the optimal incentive contract and do not motivate the managers enough to boost demand. To tackle the management challenges faced by modern service centers, we take an integrated capacity-contracting approach by incorporating operational delays and capacity decisions within the incentive contract design. Embedding a queuing model in a general incentive contracting framework, we present a novel approach to deriving the optimal compensation contract and operational capacity for a service center. We illustrate in numerical examples that a Pareto improvement can be achieved with our integrated contracting approach because every party, from the firm to the manager, to customers, to equipment and software vendors, benefits.     

A Framework for Certification and Audit of Application Service Provider—ASP

Application service provider (ASP), network-based application rental service provider of information system (IS), has appeared as a new business style in information technology (IT) market. However, there are two main differences between the ASP model and traditional IS model. First, the relationship between ASPs and customers in ASP model is more temporary than in traditional IS model. Second, information resources of ASP's customers are located at the public network and data center. In these reasons, it is important that third parties need to certify and audit an ASP for successful implementation of the ASP model. This paper investigates characteristics of the ASP model and designs the framework for certification and audit of ASP. It is examined how the framework can remove potential threats and risks of the ASP model, and how the framework can be compared with traditional approaches.     

Pricing and inventory strategies under quick response with strategic and myopic consumers

We divide consumers in the selling period into two types according to their purchasing behavior: strategic customers and myopic customers. We address the optimal inventory and pricing decision problem of a retailer considering strategic and myopic consumers with and without a quick response. The results indicate that the retailer should establish a higher price to sell only to myopic customers if there is a sufficient presence of myopic customers in the market, and the retailer should set a lower price to sell to myopic and strategic customers if the number of myopic customers in the market is relatively low. A quick response can decrease the initial ordering quantity and increase the retailer's profit when selling only to myopic customers or selling to both myopic and strategic customers. Moreover, a quick response is beneficial for the retailer to improve the product's retail price if the retailer wishes the two types of customers to purchase the product during the selling period. We also find that the pricing strategy considering strategic and myopic consumers under a quick response will increase profits more than the pricing strategy only considering myopic customers. Finally, numerical experiments are conducted to illustrate and validate the proposed models and provide managerial insights.     

网上零售业多产品配送服务定价研究

随着越来越多的网上零售商开始实施有条件的免运费策略, 如何确定免运费的条件和运费成为电商企业面临的重要问题。该问题抽象成为一个两阶段的博弈模型：首先消费者根据效用最大化的原则确定购买决策, 然后零售商在考虑消费者购买决策的基础上依据利润最大化原则设定物流定价策略。通过算法设计和算例分析, 得到免运费阈值设定在产品价格组合边界时, 零售商利润会发生跳跃。     

Making the most out of an ASP relationship

Our research indicates that to ensure mutual success, companies and ASPs will need to explore sophisticated methods of pricing ASP contracts rather than using a simple fixed-price monthly rental form. Also, companies must understand the legal implications of outsourcing to an ASP and realize the necessity of specific contractual clauses. We expect that as companies outsourcing complex products to an ASP come to understand the importance of incorporating an ASP into their strategic IT needs, contracts will provide for profit sharing and other arrangements.)     

Two pricing mechanisms for a service provider when customers’ delay costs are value-related

In this paper, we study two pricing mechanisms for a provider that serves delay-sensitive customers, one is the uniform pricing and the other is the priority auction. The expected delay cost of a customer is assumed to depend on his value for the service (i.e. the unit delay cost is a strictly increasing function of his value) and the expected sojourn time caused by the number of customers in the system (and his payment-based position in the queue if auction is adopted). Hence, each customer reacts to the service provider’s pricing mechanism by deciding whether or not to enter the service system and how much he pays. This resulting problem is a Stackelberg game. When auction is adopted, by using of adverse selection, we derive a feasible scheme in which customers with higher value would like to pay more. We further compare the performance of these two pricing mechanisms. Our numerical examples show that auction performs better not only in terms of revenue making but also in terms of social welfare improvement. Interestingly, auction can also render more customer surplus in most instances, which differs from the common techniques in revenue management field.     

基于用户业务量的在线计费方法研究

该文分析了相关研究工作,和现有在线计费系统中业务可用量分配方法存在的不足,提出了一种基于用户业务量的在线计费方法,基于用户历史业务使用量来分配业务可用量,用于在线计费系统中的用户业务可用量分配。仿真实验表明该方法分配的业务量能更贴近用户的业务使用习惯,从而有效提高了在线计费效率。     

Determinants of ASP choice: an integrated perspective

With the rise in the availability of scalable network technologies and resources, Application Service Providers (ASPs) have become increasingly more feasible sources for obtaining IS services. ASP research represents an opportunity to integrate previous research on outsourcing, applied in the area of ASP choice. Historically, outsourcing research has adopted many theoretical perspectives, including transaction cost, resource-based, resource-dependence, and knowledge-based. We apply these perspectives in the ASP context. When obtaining IS services through an ASP, factors other than cost and those explained by the resource-based and resource-dependent perspectives can become paramount. The knowledge-based perspective enables us to examine knowledge risk and integration requirements. Drawing upon past research and an exploratory study conducted with 35 respondents in 11 firms, an integrated, theoretical model is proposed, which combines the transaction cost, resource-based, resource dependency and knowledge-based perspectives. The model is used to explain the antecedent conditions useful for making decisions on IT sourcing through ASPs.     

An exploratory study into factors of service quality for application service providers

An examination of the services offered by application service providers (ASPs) indicates that their current service quality needs to be improved to satisfy current and future clients. This study attempted to fulfill this need by identifying the dimensions of service quality for the ASP industry through both qualitative and quantitative approaches. As a result, seven dimensions were identified (features, availability, reliability, assurance, empathy, conformance, and security). In addition, an initial checklist was developed to help ASPs assess and diagnose their service quality performance. Some insights and implications to the ASP practitioners were also discussed.     

信息不对称条件下寡头集团转移定价决策分析

研究信息不对称条件下存在中间产品外部市场的寡头集团转移定价决策问题.在不完全竞争中间产品外部市场条件下,当集团之间信息不对称时,对中间产品内外部实行单一定价,转移价格将大于中间产品的边际成本;对中间产品内外部实行差别定价时,转移价格则等于中间产品的边际成本.通过对两种策略的比较可知,寡头集团实行差别定价还是单一定价,取决于中间产品外部市场和最终产品市场的需求价格弹性.     

Ordering,wholesale pricing and lead-time decisions in a three-stage supply chain under demand uncertainty

This paper develops a game theoretic model of a three-stage supply chain consisting of one retailer, one manufacturer and one subcontractor to study ordering, wholesale pricing and lead-time decisions, where the manufacturer produces a seasonal/perishable product. We explicitly model the effects of the lead-time and the length of selling season on both demand uncertainty and inventory-holding costs. We present the equilibrium outcome of the decentralized supply chain. When the lead-time increases, we find that the retailer increases the order quantity, the manufacturer offers a lower unit-wholesale price and the subcontractor decreases its unit-wholesale price if the manufacturer subcontracts part of the retailer’s order. In the endogenous lead-time setting, we illustrate the effects of some factors such as unit holding cost and capacity on the equilibrium outcome. We find that a higher unit holding cost implies a lower optimal lead-time and order quantity while higher unit-wholesale prices; the basic demand uncertainty increases the optimal lead-time and order quantity while decreases the unit-wholesale prices. The effects of distribution form on equilibrium outcome/profits are investigated by employing a numerical example. The profit loss of decentralization decreases (increases) with the basic demand uncertainty and manufacturer’s capacity (mean demand).     

Bertrand equilibria and efficiency in markets for congestible network services

This paper is motivated by study of the economics of Quality of Service (QoS) of congestible services. We introduce a queueing game framework to study such problems. We consider multiple competing providers, each offering a queued service. Users are sensitive to both access price and expected delay, and pick providers with the smallest price plus delay cost. We study equilibrium of the pricing (Bertrand) game between the congestible network service providers. We establish the existence of a Nash equilibrium under some natural assumptions. We then consider a setting with multiple classes of differentiated service. Differentiated Services (DiffServ) technologies of the Internet that can provide QoS guarantees have failed to catch on, primarily due to economic impediments. Each provider is now modeled as operating a multi-class queue. We provide sufficient conditions for the existence of a Nash equilibrium in the Bertrand (pricing) game between the providers. We characterize the inefficiency (price of anarchy) due to strategic pricing to be 2/3. Surprisingly, the price of anarchy for the multi-class setting is the same as for the single-class setting.     

Application Service Providers: Will They Succeed?

This article examines the likelihood of success for application service providers (ASP) drawing from the outsourcing literature, interviews with ASPs in the USA, and the experience of Bennett who has held leadership roles in ASP and ERP in South East Asia. This article proposes that application service providers (ASP) rent packaged software, predominantly over the Internet. It shows why organizations might employ the ASP model to manage their enterprise resource planning systems. Using a framework adapted from Lacity and Hirschheim, it demonstrates that the financial, business, technical and political reasons why organizations evaluate outsourcing can be applied to ASP model. While ASPs generally target the mid-market, large enterprises are also using ASPs to introduce new ERP modules. Potential users of ASP should regard the risks of outsourcing prior to entering into business arrangements. This examination concludes that there are strong financial and technical reasons for adopting the ASP model and therefore it has potential to succeed.     

Optimal pricing of online products based on customer anchoring-adjustment psychology

Online product pricing is an important factor that affects the purchase of customers and the earnings of e-commerce platform enterprises. It has an increasingly prominent influence on consumers’ purchasing decisions. To study the influence of customers’ anchoring psychology and product pricing on customers’ purchasing behaviors, this paper proposes a pricing model that considers online consumers to be anchored by the product price and sales. The cognitive bias of online consumers is described by a utility function based on an anchoring-adjustment heuristic, and consumer choice behavior and an online product pricing strategy are studied with a multinomial logit model. Then, it studies the influence of the anchoring point and anchoring degree on optimal pricing, sales and profit. In particular, when consumers are anchored only by sales of goods, the optimal solution is monotonic with respect to the anchoring degree. However, when consumers are anchored by both price and sales, both factors affect consumer behaviors and produce more complex results. This paper provides a flexible pricing mechanism for platform enterprises, and it can provide a theoretical basis and decision support for dynamic pricing of platform enterprises based on historical consumption data.     

Using Cpk index with fuzzy numbers to evaluate service quality

Service quality is measured by customers' satisfaction. Traditionally, the degree of satisfaction is calculated from the data obtained from questionnaires that have been filled by customers directly. The percentile of each different level of a customer's satisfaction is employed to summarize and compare the quality of service provided by different enterprises. This approach does not consider the consistency of the customers' perceptions, thus making comparison difficult. This paper introduces the concept of a process capability index that considers both the average and the consistency of the data simultaneously. Evaluations of service quality are usually vague and linguistic. We use the fuzzy numbers of linguistic variables developed in fuzzy set theory to modify the process capability index, and then apply it to evaluate the quality of a service. The average and consistency of the data obtained from a service quality evaluation are thus considered simultaneously, making the comparison of the performance of service quality easier. Moreover, the value of the index can be applied to help to point out the direction for improving the performance of service quality whenever it is lower than some default value.     

Dynamic pricing and channel efficiency in the presence of the cost learning effect

This paper investigates the impacts of the supply‐side cost learning effect on dynamic pricing strategies and the channel efficiency in a decentralized supply chain consisting of a manufacturer and a retailer. The unit production cost incurred by the manufacturer declines as the cumulative output increases. With the manufacturer being the price leader, the interactions between the two channel members are modeled as a Stackelberg differential game, where the two channel members dynamically set the wholesale and retail prices over time to optimize their respective profits. We find that while the cost learning effect is beneficial to both channel members in terms of long‐term profitability, such an effect is detrimental to the channel inefficiency caused by price double marginalization. In a setting where the manufacturer sells through competing retailers, we show that the channel efficiency can be improved with the emergence of horizontal competition. Our result also indicates that the channel efficiency with a feedback pricing equilibrium is higher than that with an open‐loop equilibrium.