We consider optimal pricing problems for a product that experiences network effects. Given a price, the sales quantity of the product arises as an equilibrium, which may not be unique. In contrast to previous studies that take a best-case view when there are multiple equilibrium sales quantities, we maximize the seller's revenue assuming that the worst-case equilibrium quantity will arise in response to a chosen price. We compare the best- and worst-case solutions, and provide asymptotic analysis of revenues.
Bibliographical noteFunding Information:
This material is based upon work supported by the National Science Foundation under Grant Number CMMI 1462676 .
- Choice model
- Network effect
- Revenue management