UCL School of Management

Research seminar

Nick Petruzzi, Penn State


Monday, 26 March 2018
15.30 – 16:45

UCL School of Management is delighted to welcome Nick Petruzzi, Penn State, to host a research seminar discussing ‘Nobody pays retail anymore: Optimal pricing in distribution channels with bargain-hunting consumers’.


We study optimal retail pricing for a stylized distribution channel in which a single product is sold to a market characterized by bargain-hunting consumers, where bargain hunting is a notion that refers to the propensity of some consumers to extract psychological benefit from the purchase of a given item that is posted at a discounted price. In particular, we derive a price and discount dependent retail demand function from first principles by developing a consumer utility function that incorporates both economic and psychological utility effects associated with a posted selling price that is explicitly discounted from a posted list price. Within that context, we analytically explore the retailer’s trade-off between posting a selling price without an accompanied list price and posting a selling price that is coupled with, and explicitly discounted from, a higher list price, and we determine the retailer’s optimal one-point versus two-point pricing strategy accordingly. We then analyze the effects of wholesale pricing, manufacturer suggested retail pricing, and demand uncertainty on the optimal strategy and corresponding split of channel profits.

Open to
PhD Programme
Last updated Monday, 19 March 2018