City engineering academic contributes to retail price research
Professor of Engineering Development at City University London, Professor Philip Thomas, has co-authored two papers which have been recently published in the American Journal of Industrial and Business Management.
"Retail Price Optimization from Sparse Demand Data", jointly written with Professor Alec Chrystal, Professor Emeritus of Money and Banking at the Sir John Cass Business School, "considers the ways in which retailers may exploit very limited information available to them to set the price of each item close to its profit-maximizing level."
By mathematically modelling the variability in the maximum price acceptable to each customer by means of a probability density for demand, the authors yield insights into interpreting the concept of an optimal price as a measure of demand distribution.
In their paper, "Generalized Demand Densities for Retail Price Investigation", Professors Thomas and Chrystal "introduce generalized demand densities as a new and effective way of conceptualizing and analyzing retail demand".
Professor Thomas, who has also carried out extensive research into risk assessment in the nuclear energy industry, employs the concept of probability density, used in risk analysis:
"These two papers borrow the concept of a probability density used extensively in risk analysis and apply it in an economic context to characterise the maximum acceptable price (MAP) that different people will place on the same retail item. They show that the optimal price from the retailer's point of view will always lie close to the average MAP that consumers are prepared to countenance and this fact can be exploited by the retailer to set his price very close to the optimum based on the minimum of market testing. The papers incorporate the useful suggestions made in discussion by the mathematical statisticians, Roger Jones, Honorary Visiting Fellow at City University, and Sir John Kingman, formerly Director of the Newton Institute, Cambridge University."
To read the papers, please visit this link.