Price Competition in the Random Coefficient Attraction Choice Models with Linear Cost

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)623–658
Number of pages36
Journal / PublicationJournal of the Operations Research Society of China
Issue number3
Online published7 Jan 2022
Publication statusPublished - Sept 2022


We study the pricing game between competing retailers under various random coefficient attraction choice models. We characterize existence conditions and structure properties of the equilibrium. Moreover, we explore how the randomness and cost parameters affect the equilibrium prices and profits under multinomial logit (MNL), multiplicative competitive interaction (MCI) and linear attraction choice models. Specifically, with bounded randomness, for the MCI and linear attraction models, the randomness always reduces the retailer’s profit. However, for the MNL model, the effect of randomness depends on the product’s value gap. For high-end products (i.e., whose value gap is higher than a threshold), the randomness reduces the equilibrium profit, and vice versa. The results suggest high-end retailers in MNL markets exert more effort in disclosing their exact product performance to consumers. We also reveal the effects of randomness on retailers’ pricing decisions. These results help retailers in making product performance disclosure and pricing decisions.

Research Area(s)

  • Effects of randomness, Equilibrium existence, Pricing game, Random coefficient choice models