BUS429 Pricing Analytics and Revenue Management

• Topics

  The course will aim to address the central question: "At what price should firms sell their output to maximize profits?"

  To explore this, students will utilize micro-level data to:

  • Estimate consumer demand,
  • Analyze production, cost, and profit functions,
  • Assess the competitive dynamics among firms.

  A particular emphasis will be placed on price differentiation (segmentation) and pricing strategies under supply constraints. The course will also incorporate sustainability into both demand and supply analyses. On the demand side, students will examine how consumer preferences for green products influence price elasticity. On the supply side, they will factor in the marginal costs of production, including the cost of greenhouse gas emissions. This integrated approach will provide students with a comprehensive understanding of how sustainability impacts pricing decisions, ensuring firms can align profitability with environmentally responsible practices.

• Learning outcome

  The course provides students with the tools to understand the tactical function of pricing and revenue optimization. Specifically, students will learn how to apply management science analytical techniques to set prices effectively while considering broader economic, social, and environmental factors.

  After completing the course, students will be able to:

  Knowledge

  • Understand demand systems in both product and characteristics space, incorporating consumer preferences for sustainable products.
  • Grasp the role of marginal costs in homogeneous vs. differentiated product spaces, including the external costs associated with emissions and environmental impact.
  • Comprehend the economic foundations of pricing theory, with an emphasis on sustainable practices that balance profitability with environmental responsibility.
  • Understand what constitutes a sustainable pricing strategy, including how firms can price products to reflect eco-friendly production methods, carbon emissions, and changing consumer expectations regarding sustainability.

  Skills

  • Identify potential applications of pricing and revenue management in new industries, especially those undergoing transitions towards greener technologies and processes.
  • Use analytical tools to model real-world pricing decision-making processes, incorporating both traditional economic factors and sustainability metrics, such as carbon footprints and ethical sourcing costs.
  • Implement pricing solutions that integrate sustainability by balancing financial performance with reducing environmental impact, allowing firms to remain competitive in eco-conscious markets.

  General Competences

  • Write reports that clearly and concisely communicate pricing strategies and their alignment with sustainable business practices, providing business insights to diverse audiences, including stakeholders focused on corporate social responsibility and environmental goals.

• Teaching

  Lectures, computer workshops, team project.

• Recommended prerequisites

  Elementary Statistics, Probability, and Optimization.

• Required prerequisites

  Elementary statistics, probability, and microeconomics.

• Credit reduction due to overlap

  None.

• Compulsory Activity

  None.

• Assessment

  Final written project (100%) - in groups of two students (or one student) - where the student(s) will solve specific questions related to the course content. The students will work on the final written project for 7 days, after the last lecture.

• Grading Scale

  A - F.

• Computer tools

  MS Excel and R.

• Literature

  Arne Henningsen (2020) Introduction to Econometric Production Analysis with R

  Victor Aguirregabiria (2021) Empirical Industrial Organization: Models, Methods, and Applications

  Jean Tirole (1988) The theory of industrial organization