Supported by the Luxembourg National Research Fund (FNR) 17539924
Abstract
In this presentation, I will discuss firms’ product pricing decisions with the goal of optimally balancing the expected profit and the risk associated with uncertain customer choices. Product line pricing in a multi-product environment can be intriguing because the decision affects both the expected profit and its variability in a complicated fashion due to demand interactions among the products. I examine two alternative settings: (1) a monopolist managing a complex product line, where the monopolist strategically prices its product line based on risk preference; (2) a competitive equilibrium of multiple firms each with distinct risk preference, where we analyse the effect of risk on a firm’s competing power and its interaction with market entry cost. Lastly, I will briefly discuss a firm’s assortment decision with risk considerations.
About Hongmin LI
Register for the seminar – as of May 22, 2023