Industrial Engineering MS Thesis Defense by Sefa Canberk Tellal

KOÇ UNIVERSITY

GRADUATE SCHOOL OF SCIENCES & ENGINEERING

INDUSTRIAL ENGINEERING

MS THESIS DEFENSE BY SEFA CANBERK TELLAL

Title: Estimation of Price Elasticity and Optimal Pricing Decisions for an Omni-Channel Retailer

Speaker: Sefa Canberk Tellal

Time: 05/27/2019 – 09:00 AM

Place: ENG 208

Koç University

Rumeli Feneri Yolu

Sariyer, Istanbul

Thesis Committee Members:

Prof.  Fikri Karaesmen (Advisor, Koç University)

Prof. Gürhan KökName (Advisor, Koç University)

Asst. Prof. _Ihsan Yanıkoğlu (Özyeğin University)

Asst. Prof. Pelin Gülşah Canbolat (Koç University)

Asst. Prof. Erhun Özkan (Koç University)

Abstract:

Pricing decisions and high competition are two significant factors in profit maximization in the consumer electronics market. Competitors sell high valued identical products most of the time and the consumers tend to monitor price of a product and substitutes of that product before making the purchase. Because of dynamic nature of consumer electronics market, there are dozens of pricing decisions to give every day. For a pricing manager, it is not easy to find optimal prices for dozens of products each day. In addition, price of a product is not only pricing based factor that effects the demand of the product. Price of the substitute products and price of the product at the competitor stores effect the demand of the product. In this study, we develop a demand prediction model which can make daily sales forecasts and develop two optimization methods to maximize total profit. First, we develop a model which can identify cross-price elasticity and competitor-price elasticity as well as price elasticity of a product. Then, we propose a non-linear integer model and an iterative binary search algorithm to solve multi-product price optimization problem. As an additional study, a field experiment is conducted and observed potentially promising results.