【Speaker】LIU Qian, Assistant Professor,Hong Kong University of Science and Technology

【Topic】Selling to Heterogeneous Customers with Uncertain Valuations under Returns Policies

【Time】16:30-18:00, 2010-06-22, Tuesday

【Venue】Weilun 401, Tsinghua SEM

【Language】English

【Organizer】Research Center of Contemporary Management, Tsinghua University

Department of Management Science and Engineering

Abstract

We consider a firm that sells a product with a finite capacity to a market with a random population size. Each customer's valuation of the product consists of two components: the customer's intrinsic value of the product which is privately known by him before purchase, and the product's fitness which is ex ante uncertain and revealed to him only after purchase. The customers are heterogeneous in the sense that they differ in their intrinsic values. Because of its lack of knowledge about the customer's intrinsic value before purchase and the product fitness after purchase, the firm essentially faces a sequential screening problem. It has been established in the literature that with unlimited capacity, it is optimal for the firm to offer a menu of returns contracts simultaneously to serve the entire population. However, we show that this optimality result no longer holds when the firm has a finite capacity. In particular, we show that the firm is better off by offering a menu of returns contracts sequentially, i.e., offering one at a time. (joint work with Wenqiang Xiao)

Speaker’s bio

LIU Qian is currently an assistant professor in the department of Industrial Engineering and Logistics Management at the Hong Kong University of Science and Technology. Her research interest includes revenue management and pricing, consumer behavior in operations management. She received the Ph.D. degree in Decision, Risk and Operations from Columbia University in 2006, and the B.E. and M.E. in Control Theory and Control Engineering from Tsinghua University in 1998 and 2001.