EURO 2024 Copenhagen
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1522. Intertemporal Bundling with Patient Customers: A Comparison of Behavioral Response and Normative Equivalence

Invited abstract in session WC-50: E-Commerce, stream Retail Operations.

Wednesday, 12:30-14:00
Room: M2 (building: 101)

Authors (first author is the speaker)

1. Burak Gokgur
Sabancı University
2. Ayse Kocabiyikoglu
Sabanci University

Abstract

We consider the problem of a retailer selling products that can be offered individually or in a bundle to a market that comprises heterogeneous customers who differ in terms of their valuations for the products and their patience levels. First, we develop a mathematical model that captures the retailer’s expected revenue maximization problem over an infinite horizon in a multi-segment market setting. Then, we present results from numerical experiments that assess the benefits of adopting an intertemporal bundling policy and investigate its behavior with respect to the market structure. Finally, we study, via behavioral experiments, whether human decision-makers are able to fully capture the benefits of offering the bundle at random intervals. Our computational results indicate that intertemporally randomized bundle offer attenuates the negative revenue impact of positively correlated valuations in the presence of patient consumers, thereby elevating the bottom line. Besides, the behavioral experiments show that decision-makers' responses significantly deviate from those of normative counterparts as the heterogeneity in the market structure and the complexity of the pricing mechanism increase.

Keywords

Status: accepted

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