Performance-Price-Ratio Utility: Market Equilibrium Analysis and Empirical Calibration Studies

• 成果类型: Article
• 署名作者: Xie, Yangyang; Xie, Lei; Lu, Meng; Yan, Houmin
• 署名单位: Chinese Academy of Sciences; University of Science & Technology of China, CAS; Shanghai University of Finance & Economics; City University of Hong Kong
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13331
• 发表日期: 2021
• 页码: 1442-1456
• 关键词: performance‐ price ratio; customer choice; pricing game; China TV market; model calibration

摘要

In this study, as an alternative to the surplus utility, we propose a performance-price-ratio (PPR) utility and specialize the customer choice model with a PPR maximization criterion. With the PPR-based choice model, we investigate a pricing game between retailers in a competitive market. Through transferring the decision variable from price to performance-price ratio, the first-order condition of the game becomes a linear equation system, which enables us to develop a closed-form equilibrium solution. The solution reveals how product performance and price sensitivity affect equilibrium pricing, market share, and revenue. With the developed theoretical results, we carry out empirical studies with a rich data set obtained from the China TV market. At the individual product level and the brand level, we calibrate the PPR-based choice model and the widely used surplus-based model with a Bayesian information criteria-based stepwise multivariate regression method. The regression results suggest that the PPR-based model fits both the product-level and brand-level data better than the surplus-based model. Through the stepwise selection of independent variables, we find that the leading features affecting a TV's performance are 3D TV functionality and its screen size. Moreover, we explore how the market equilibrium evolves with the game decision sequence, market structure, and new product entry.