Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden...
-
Upload
elaine-higgins -
Category
Documents
-
view
216 -
download
2
Transcript of Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden...
![Page 1: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/1.jpg)
Marc IVALDI
Workshop on Advances on Discrete Choice Models
in the honor of Daniel McFadden
Cergy-Pontoise – December 18, 2015
A Welfare Assessment of Revenue Management
Systems
![Page 2: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/2.jpg)
Joint withNicolas Dupuis,Toulouse School of EconomicsJerome Pouyet, Paris School of Economics
2
![Page 3: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/3.jpg)
Going to Lyon from Paris by Train
3
![Page 4: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/4.jpg)
4
![Page 5: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/5.jpg)
5
![Page 6: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/6.jpg)
6
![Page 7: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/7.jpg)
7
![Page 8: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/8.jpg)
8
![Page 9: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/9.jpg)
9
![Page 10: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/10.jpg)
10
![Page 11: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/11.jpg)
Going to Lyon from Paris
• Paris – Lyon― 4 hours 21 minutes by car
• Different trains• Different service conditions
― First and second classes• Outcome
― Wide range of fares depending on the buying date― Availability of seats is changing
11
![Page 12: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/12.jpg)
Revenue Management
• A form of intertemporal price discrimination― Transport industry: Airlines, railroads― Other industries: Movie theaters, hotels
• Policy debate on the outcome― For the same product, large range of prices among
purchasers― Fairness versus Efficiency
• Research― Welfare analysis― Impact on producer profit, consumer surplus, total
welfareo Monopolyo Competition
12
![Page 13: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/13.jpg)
Contribution
• Limited number of articles and studies on RM• Main results
― RM increases consumer surplus― RM may have a redistribution effect between leisure
and business Passengers― Competition among operators decreases prices but
increases its dispersion― Competition does not necessarily yield an optimal
capacity and operators tend to exploit at the maximum of the available capacity
13
![Page 14: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/14.jpg)
Methodology
• No data, no econometric analysis― Very complex and heavy― Not useful for practitioners
• Simulation― Allow to exhibit / to elicitate the business strategies of
buyers
14
![Page 15: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/15.jpg)
Basic ingredients of the basic model
• A product― Train ticket― Constrained availability
o Number of days before departureo Number of seats left
• A railroad (monopoly)― Set of possible prices for the different trains― Closing option = put an infinite price
• A traveller― Homogenous consumers― Random arrival on the website or at the ticket window― Myopic expectations― Decision: buy the ticket or take the outside option
15
![Page 16: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/16.jpg)
The revenue manager’s problem
• Objective― Choose the sequence of prices in ordre to maximize
expected revenue at each period • Expected revenue
16
![Page 17: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/17.jpg)
Computation
17
• Supply― Train capacity is fixed = 400 seats― 2 prices (low = 40, high = 90)
• Demand― Choice (buying) probability based on a multinomial logit
specification― Calibrate the parameters to yield realistic estimate of
demand elasticities• Market size
― No more than one consumer per period― Function of the arrival rate from 0.2 to 0.9 (step 0.1)― Time constraint = number of periods before departure― Example
o Medium size = 1000 (arrival rate = 0.4)o Large size = 1400 (arrival rate = 0.7)
![Page 18: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/18.jpg)
Standard profile
18
![Page 19: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/19.jpg)
Profile under high demand
19
![Page 20: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/20.jpg)
20
Revenue Management versus Optimal Fixed PriceChange in profit
![Page 21: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/21.jpg)
21
Revenue Management versus Optimal Fixed PriceChange in consumer surplus
![Page 22: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/22.jpg)
Heterogenous Consumers
• Two types of train:― Off peak― Rush hour
• Two types of passengers (i.e., different demand elasticity)― Leisure― Business
• Two pricing strategies― Fixed Price― Revenue Management
22
![Page 23: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/23.jpg)
Change in Profitfrom Fixed Price to Revenue Management
400 1000 1400 18000%
2%
4%
6%
8%
10%
12%
14%
16%
23
![Page 24: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/24.jpg)
Change in Surplus of Business Passengersfrom Fixed Price to Revenue Management
400 1000 1400 1800
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
24
![Page 25: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/25.jpg)
Change in Surplus of Leisure Passengersfrom Fixed Price to Revenue Management
400 1000 1400 18000%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
25
![Page 26: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/26.jpg)
Load rates of Leisure and Business Passengersfrom Fixed Price to Revenue Management
400 1000 1400 1800
-10%
-5%
0%
5%
10%
15%
20%
Rush hour / Business
Rush hour / Leisure
26
![Page 27: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/27.jpg)
Competition between revenue managers
• Type of competition― Indirect competition: Rail versus Road― Direct competition: Rail versus Air
• Two horizontally differentiated products• Two industrial structure
― A multiproduct monopoly― A duopoly
27
![Page 28: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/28.jpg)
Results
• Higher profit under monopoly than under duopoly• Higher surplus under duopoly tahn under
monopoly• Price dispersion
28
![Page 29: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/29.jpg)
Conclusion
• Revenue management ― A practice in general beneficial to both consumers and
firms• Key variables
― Market size and capacity constraints
• Further work― More strategic behavior of consumers
29
![Page 30: Marc IVALDI Workshop on Advances on Discrete Choice Models in the honor of Daniel McFadden Cergy-Pontoise – December 18, 2015 A Welfare Assessment of Revenue.](https://reader035.fdocuments.in/reader035/viewer/2022070415/5697c0301a28abf838cdb039/html5/thumbnails/30.jpg)
30
Thank you!