A Nonatomic-Game Model for Timing Clearance Sales Under Competition

Abstract: We deal with dynamic revenue management (RM) under competition using the nonatomic-game approach. Here, a continuum of heterogeneous sellers try to sell the same product over a given time horizon. Each seller can lower his price once at the time of his own choosing, and faces Poisson demand arrival with a rate that is the product of a price-sensitive term and a market-dependent term. Different types of sellers interact, and their respective prices help shape the overall market in which they operate, thereby influencing the behavior of all sellers. Using the infinite-seller approximation, which deprives any individual seller of his influence over the entire market, we show the existence of a certain pattern of seller behaviors that collectively produce an environment to which the behavior pattern forms a best response. Such equilibrium behaviors point to the suitability of threshold-like pricing policies. Our computational study yields insights to RM under competition, such as profound ways in which consumer an