Asia pacific journal of information systems

The Korea Society of Management Information Systems (한국경영정보학회)
권호 표지
DOI QR코드

DOI QR Code

Smart Pricing in Action: The Case of Asset Pricing for a Rent-a-Car Company

  • Chang Hee Han (College of Business and Economics, Hanyang University) ;
  • Seongmin Jeon (College of Business, Gachon University) ;
  • Sangchun Shim (College of Business and Economics, Hanyang University) ;
  • Byungjoon Yoo (College of Business Administration, Seoul National University)
  • Received : 2019.03.19
  • Accepted : 2019.08.29
  • Published : 2019.12.31
Download PDF
⟨ Previous Next ⟩

Abstract

The Internet enables businesses to acquire a great deal of information, including prices in the open markets. In this study, we investigate what the value of reference price information is to a company in the market and how the company can make use of such information. Using business analytics, we were able to estimate prices of used cars for a rent-a-car company. The results show that a smart pricing information system is useful for collecting online reference price information and for estimating future prices of used cars and rental prices.

Keywords

Acknowledgement

The authors are thankful for the support by the Institute of Management Research at Seoul National University.

References

  1. Akerlof, G. (1970). The market for lemons: Qualitative uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), pp. 488-500.
  2. Anderson, N. H. (1968). A simple model for information integration. R. P. Abelson, E. Aronson, W. J. McGuire, T. M. Newcomb, M. J. Rosenberg, P. H. Tannenbaum, eds. Theories of Cognitive Consistency: A Sourcebook. Rand McNally, Chicago, 731-758.
  3. Alba, J. W., Lynch, J., Weitz, B., Janiszewski, C., Lutz, R., Sawyer, A., and Wood, S. (1997). Interactive home shopping: Consumer, retailer, and manufacturer incentives to participate in electronic marketplaces. Journal of Marketing, 61(3) 38-53.
  4. Bakos, J. Y. (1997). Reducing buyer search costs: implications for electronic marketplaces. Management Science, 43(12), 1609-175.
  5. Bailey, J. P. (1998). Intermediation and electronic markets: Aggregation and pricing in Internet commerce. Ph.D. Thesis, Technology, Management and Policy, Massachusetts Institute of Technology, Cambridge, MA.
  6. Bailey, J. P. (1998). Electronic commerce: prices and consumer issues for three products: Books, compact discs, and software. Organisation for Economic Co-Operation and Development, OCDE/GD (98), 4.
  7. Briesch, R. A., Krishnamurthi, L., Mazumdar, T., and Raj, S. P. (1997). A comparative analysis of reference price models. Journal of Consumer Research, 24(2), 202-214.
  8. Brynjolfsson, E., and Hitt, L. M. (2000). Beyond computation: Information technology, organizational transformation and business performance. Journal of Economic Perspectives, 14(4), 23-48.
  9. Brynjolfsson, E., and Smith, M. D. (1999). Frictionless commerce? A comparison of internet and conventional retailers. Working Paper.
  10. Brynjolfsson, E., and Smith, M. D. (2000). Frictionless commerce? A comparison of internet and conventional retailers. Management Science, 46(4), 563-585.
  11. Carling, K., Hakansson, J., and Jia, T. (2013). Out-of-town shopping and its induced CO2-emissions. Journal of Retailing and Consumer Services, 20, 382-388.
  12. Chellappa, R. K., Sin, R. G., and Siddarth, S. (2011). Price formats as a source of price dispersion: A study of online and offline prices in the domestic US airline markets. Information Systems Research, 22(1), 83-98.
  13. Degeratu, A., Rangaswamy, A., and Wu, J. (1998). Consumer choice behavior in online and regular stores: The effects of brand name, price, and other search attributes. Presented at Marketing Science and the Internet, INFORM College on Marketing MiniConference. Cambridge, MA. 6-8 March.
  14. Degeratu, A., Rangaswamy, A., and Wu, J. (2000). Consumer choice behavior in online and traditional supermarkets: The effects of brand name, price, and other search attributes. Internat. J. Res. Marketing, 17(1), 55-78.
  15. Emons, W., and Sheldon, G. (2009). The market for used cars: new evidence of the lemons phenomenon. Applied Economics, 41(22), 2867-2885.
  16. Engers, M., Hartmann, M., and Stern, S. (2009). Are lemons really hot potatoes? International Journal of Industrial Organization, 27(2), 250-263.
  17. Erdem, T., Keane, M., and Sun, B. (2008). A dynamic model of brand choice when price and advertising signal product quality. Marketing Science, 27(6), 1111-1125.
  18. Genesove, D. (1993). Adverse selection in the wholesale used car market. Journal of Political Economy, 101(4), 644-665.
  19. Gongqi, S., Yansong, W., and Qiang, Z. (2011). New model for residual value prediction of the used car based on BP neural network and nonlinear curve fit. In Measuring Technology and Mechatronics Automation (ICMTMA), 2011 Third International Conference on (Vol. 2, pp. 682-685). IEEE.
  20. Goolsbee, A. (1999). In a world without borders: the impact of taxes on internet commerce. Working Paper, University of Chicago.
  21. Gupta, A., Su, B., and Walter, Z. (2004). An empirical study of consumer switching from traditional to electronic channel: A purchase decision process perspective. International Journal of Electronic Commerce, 8(3) 131-161.
  22. Harless, D. W., and Hoffer, G. E. (2002). Do women pay more for new vehicles? Evidence from transaction price data. The American Economic Review, 92(1), 270-279.
  23. Hendel, I., and Nevo, A. (2006). Measuring the implications of sales and consumer inventory behavior. Econometrica, 74(6), 1637-1673.
  24. Hotelling, H. (1929). Stability in Competition. The Economic Journal, 41-57.
  25. Kalyanaram, G., and Winer, R. S. (1995). Empirical generalizations from reference price research. Marketing Science, 14(3, Part 2), G161-G169.
  26. Konishi, H., and Sandfort, M. T. (2002). Existence of stationary equilibrium in the markets for new and used durable goods. Journal of Economic Dynamics and Control, 26(6), 1029-1052.
  27. Kuiper, S. (2008). Introduction to multiple regression: How much is your car worth? Journal of Statistics Education, 16(3).
  28. Lal, R., and Sarvary, M. (1999). When and how is the internet likely to decrease price competition? Marketing Science, 18(4), 485-503.
  29. Lee, D.W. (2007). Understanding price adjustments in E-commerce. Asia Pacific Journal of Information Systems, 17(4), 113-132.
  30. Lee, H. (1997). Do electronic marketplaces lower the price of goods. Communications of the ACM, 41(12).
  31. Listiani M. (2009). Support vector regression analysis for price prediction in a car leasing application. Master Thesis. Hamburg University of Technology
  32. Mankiw, M. G., and Taylor, M. P. (2006). Microeconomics: Thomson Learning.
  33. Marell, A., Davidsson, P., Garling, T., and Laitila, T. (2004). Direct and indirect effects on households' intentions to replace the old car. Journal of Retailing and Consumer Services, 11, 1-8.
  34. Noor, K., and Jan, S. (2017). Vehicle price prediction system using machine learning techniques. International Journal of Computer Applications, 167(9), 27-31.
  35. Parment, A., (2008). Distribution strategies for volume and premium brands in highly competitive consumer markets. Journal of Retailing and Consumer Services, 15, 250-265.
  36. Prieto, M., Barbara, C., and George, B. (2015). Using a hedonic price model to test prospect theory assertions: The asymmetrical and nonlinear effect of reliability on used car prices. Journal of Retailing and Consumer Services, 22, 206-212.
  37. Pudaruth, S. (2014). Predicting the price of used cars using machine learning techniques. International Journal of Computer and Information Technology, 4(7), 753-764.
  38. Richardson, M. S. (2009). Determinants of used car resale value. Retrieved from: https://digitalcc.coloradocollege.edu/islandora/object/coccc%3A1346
  39. Rust, J. (1987). Optimal replacement of GMC bus engines: An empirical model of Harold Zurcher. Econometrica: Journal of the Econometric Society, 55(5), 999-1033.
  40. Salop, S. (1979). Monopolistic competition with outside goods. Bell Journal of Economics, 10, 141-156.
  41. Smith, M. D., Bailey, J., and Brynjolfsson, E. (2001). Understanding digital markets: Review and assessment. Working Paper 4211-01, Sloan School of Management, MIT, Cambridge, MA.
  42. Stigler, G. J. (1961). The economics of information. The Journal of Political Economy, 69(3), 213-225.
  43. Sun, B. (2005). Promotion effect on endogenous consumption. Marketing Science, 24(3), 430-443.
  44. Verboven, F. (2002). Quantitative study to define the relevant market in the passenger car sector (Report for the European Commission for competition).
  45. Verboven, F., and Brenkers, R. (2006). Market definition with differentiated products: Lessons from the car market. In: Choi, J.P. (Ed.), Recent Developments in Antitrust: Theory and Evidence. MIT Press, Cambridge.
  46. Walter, Z., Gupta, A., and Su, B. C. (2006). The sources of on-line price dispersion across product types: An integrative view of on-line search costs and price premiums. International Journal of Electronic Commerce, 11(1), 37-62.
  47. Wu, J. D., Hsu, C. C., and Chen, H. C. (2009). An expert system of price forecasting for used cars using adaptive neuro-fuzzy inference. Expert Systems with Applications, 36(4), 7809-7817.
  48. Zettelmeyer, F., Morton, F. S., and Silva-Risso, J. (2006). Scarcity rents in car retailing: Evidence from inventory fluctuations at dealerships (No. w12177). National Bureau of Economic Research.