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- W2976703203 abstract "Abstract This paper examines three types of sensitivity analysis on a firm's responsive pricing and responsive production strategies under imperfect demand updating. Demand has a multiplicative form where the market size updates according to a bivariate normal model. First, we show that both responsive production and responsive pricing resemble the classical pricing newsvendor with posterior demand uncertainty in terms of the optimal performance and first‐stage decision. Second, we show that the performance of responsive production is sensitive to the first‐stage decision, but responsive pricing is insensitive. This suggests that a “posterior rationale” (ie, using the optimal production decision from the classical pricing newsvendor with expected posterior uncertainty) allows a simple and near‐optimal first‐stage production heuristic for responsive pricing. However, responsive production obtains higher expected profits than responsive pricing under certain conditions. This implies that the firm's ability to calculate the first‐stage decision correctly can help determine which responsive strategy to use. Lastly, we find that the firm's performance is not sensitive to the parameter uncertainty coming from the market size, total uncertainty level and information quality, but is sensitive to uncertainty originating from the procurement cost and price‐elasticity." @default.
- W2976703203 created "2019-10-03" @default.
- W2976703203 creator A5034880533 @default.
- W2976703203 creator A5041916887 @default.
- W2976703203 date "2019-09-26" @default.
- W2976703203 modified "2023-10-14" @default.
- W2976703203 title "Sensitivity analysis on responsive pricing and production under imperfect demand updating" @default.
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- W2976703203 doi "https://doi.org/10.1002/nav.21870" @default.
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