Three Essays in Technology and Revenue Management

Abstract

In this dissertation, I apply optimization methods and game theory to address three problems in technology and revenue management. In the first essay, I analyze how brand commitment and product failure impact a firm's upgrade strategy in the presence of a stochastically evolving technological frontier. The essay explores the optimal timing of upgrades across a variety of market parameters and establishes the market conditions in which firms should invest in brand commitment to lengthen the product upgrade cycle. The model also demonstrates that firms with high brand commitment must balance the benefits of pent-up demand with potential loss due to product failure. The second and third essay focus on the allocation of resources and products in the presence of demand uncertainty and consumer behavior, respectively. In the second essay, I develop a methodology to approximate the value of capacity in the network airline revenue management problem. The value of capacity is used to control the sale of products to consumers requesting products over a finite time horizon. The advantage of this methodology is the scalability, which we demonstrate by solving for capacity values on an industrial sized network. In the third essay, I study a consumer-to-consumer exchange market. I prove that there exists market conditions where the equilibrium prices allow a unique opitmal allocation of products amongst participants.