Fredrik Odegaard

• van de Geer, R.; V. den Boer, A.; Bayliss, C.; Currie, C.; Ellina, A.; Esders, M.; Haensel, A.; Lei, X.; Maclean, K.; Martinez-Sykora, A., et al., (Forthcoming), "Dynamic Pricing and Learning with Competition: Insights from the Dynamic Pricing Challenge at the 2017 INFORMS RM & Pricing Conference", Journal of Revenue and Pricing Management.

  Abstract: This paper presents the results of the Dynamic Pricing Challenge, held on the occasion of the 17th INFORMS Revenue Management and Pricing Section Conference on June 29–30, 2017 in Amsterdam, The Netherlands. For this challenge, participants submitted algorithms for pricing and demand learning of which the numerical performance was analyzed in simulated market environments. This allows consideration of market dynamics that are not analytically tractable or can not be empirically analyzed due to practical complications. Our findings implicate that the relative performance of algorithms varies substantially across different market dynamics, which confirms the intrinsic complexity of pricing and learning in the presence of competition.

  Link(s) to publication:

  https://www.researchgate.net/publication/324435862_Dynamic_Pricing_and_Learning_with_Competition_Insights_from_the_Dynamic_Pricing_Challenge_at_the_2017_INFORMS_RM_Pricing_Conference

• Banciu, M.; Odegaard, F.; Stanciu, A., (Forthcoming), "Distribution-free Bounds for the Expected Marginal Seat Revenue Heuristic with Dependent Demands", Journal of Revenue and Pricing Management.

  Abstract: This paper extends the fundamental static revenue management capacity control problem by incorporating statistical dependence. A single-resource is sold through multiple fare classes each with a corresponding stochastic, but not necessarily independent, demand. We explicitly account for any level of positive or negative dependence and focus on the traditional macro-level demand model in order to provide distribution-free bounds on the foundational Expected Marginal Seat Revenue heuristics, both without and with buy-up. We illustrate for the case with three fare classes and demand drawn from: (i) normal distributions, and (ii) normal and exponential distributions.

  Link(s) to publication:

  https://link.springer.com/article/10.1057/s41272-018-00170-6

  http://dx.doi.org/10.1057/s41272-018-00170-6

• Mahjoub, R.; Odegaard, F.; Zaric, G. S., 2018, "Evaluation of a pharmaceutical risk-sharing agreement when patients are screened for the probability of success", Health Economics, January 27(1): e15 - e25.

  Abstract: We analyze a game-theoretic model of a risk-sharing agreement between a payer and a pharmaceutical firm. The drug manufacturer chooses the price while the payer sets the rebate rate and decides which patients are eligible for treatment. The manufacturer provides the payer with a rebate for nonresponding patients. We generalize on the existing literature, by making both price and rebate rate decision variables, allowing the rebate rate to be different from 100%, and incorporating 2 types of administrative costs. We identify a threshold for the expected probability of response for classifying the drug as a mass-market or niche type and investigate the optimal solutions for both types. We also identify a threshold for the rebate rate at which the net benefits become equal for responding and nonresponding patients. Through numerical examples, we examine how various parameters impact the drug manufacturer's and the payer's optimal solution.

  Link(s) to publication:

  https://onlinelibrary.wiley.com/doi/abs/10.1002/hec.3522

  http://dx.doi.org/10.1002/hec.3522

• Mirzai, F.; Odegaard, F.; Yan, X. H., 2017, "Airline Switching Revenue with Price-Guarantees", Journal of Revenue and Pricing Management, June 16(3): 308 - 324.

  Abstract: Many airlines permit ticket holders to change the time of their flight by paying a switching fee. For an airline, selecting a switching fee is an important strategic decision for two reasons. First, it is a supplementary but considerable revenue item for firms with a narrow profit margin. Second, the fee impacts their demand and consequently their capacity planning. Knowing that a low or high fee could cause operational challenges, such as unsold capacity or lost sales, the question that arises is what fee should be set for switching. We model a single firm which delivers two sequential homogeneous services that are priced differently a high-priced service followed by a low-priced one. The price difference triggers a demand leakage across the two services. Switching customers pay a switching fee but get reimbursed the price difference. This reimbursement is an extension of airlines' current switching practice and money-back guarantees that are common in retail industries (such as consumer electronics). We analyze the firm's revenue function and derive the optimal switching fee. We show that the variability in switching behavior of customers drives the firm's ideal switching policy. When this uncertainty increases, the firm should impose a higher switching fee. Furthermore, the optimal switching fee is rising in the resources' prices. Finally, through numerical analysis, we investigate the joint decisions of the service price and the switching fee. This analysis shows that the optimal fee is increasing in the size of the low-price service.

  Link(s) to publication:

  http://dx.doi.org/10.1057/s41272-016-0055-z

• Banciu, M.; Odegaard, F., 2016, "Optimal Product Bundling with Dependent Valuations: the Price of Independence", European Journal of Operational Research, December 255(2): 481 - 495.

  Abstract: In this paper we investigate the tactical problem of pricing a bundle of products when the underlying valuations of the bundle components are dependent. We use copula theory to model the joint density of reservation prices and provide analytical derivations for the prices under different bundling strategies and sharp bounds for the profit function. We discover that when only the bundle is offered and the marginal costs are relatively small, the seller is better off by bundling products that have a negative association between their valuations, while the converse is true when the marginal costs are relatively high. We also show that the net benefit of offering a full product line containing both the bundle and the components decreases for mild to strong associations between the component valuations, compared to offering just the bundle. Finally, we analyze how the typical literature assumption of independence of reservation prices impacts the seller’s profitability when in fact the valuations are dependent, and find that this gap in profitability, which we call the price of independence, can be arbitrarily large.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.ejor.2016.05.022

• Odegaard, F.; Wilson, J. G., 2016, "Dynamic Pricing of Primary Products and Ancillary Services", European Journal of Operational Research, June 251(2): 586 - 599.

  Abstract: Motivated by the growing prevalence for airlines to charge for checked baggage, this paper studies pricing of primary products and ancillary services. We consider a single seller with a fixed capacity or inventory of primary products that simultaneously makes an ancillary service available, e.g. a single-leg flight and checked baggage service. The seller seeks to maximize total expected revenue by dynamically setting prices on both the primary product and the ancillary service. In each period, a random number of customers arrive each of whom may belong to one of three groups: those that only want the primary products, those that would buy the ancillary service if the price is right, and those that only purchase a primary product together with the ancillary service. A multi-period dynamic pricing model is presented with computational complexity only of order equal to the number of periods. For certain distributions, close to analytical results can be obtained from which structural insights may be gleaned.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.ejor.2015.11.026

• Hassan-Mirzaei, F.; Odegaard, F.; Yan, X. H., 2015, "Customer Revenue Sharing Program in Online Social Media", Omega-International Journal of Management Science, December 57(B): 123 - 144.

  Abstract: Online social media (OSMs) have become a popular and growing Internet phenomenon, as exemplified by the millions of followers of websites like YouTube, Twitter, and Facebook. Given the Internet’s ease of access and the high degree of competition to attract users to these sites, a question arises as to whether OSMs should develop revenue-sharing programs as a way to reward their contributing users. We present an ex ante asymmetric duopoly OSM game, where heterogeneous users are either active or passive with respect to each OSM. The game includes two steps: First, the OSMs simultaneously announce their rewards for active users and second, based on their preference, users choose their level of contribution with respect to each OSM. We show that this game has a unique Nash equilibrium in pure strategies, and we identify the conditions under which a symmetric equilibrium exists, despite the asymmetry between the OSMs. Moreover, at equilibrium, no user chooses to contribute content exclusively to the less favourable OSM, even when the more favourable firm shares a lower reward than the less favourable firm. Furthermore, in some circumstances, a higher asymmetry can diminish the net revenue of the more favourable firm and vice versa.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.omega.2015.02.007

• Davison, M.; Odegaard, F., 2015, "Do Retailers Set Optimal Prices in the Case of Retail Gasoline Market?", International Journal of Revenue Management, June 8(3/4): 241 - 259.

  Abstract: How should gasoline retailers respond to other competing retailers and to changes in commodity gasoline prices to set their own prices over time? This question opens the door to an important discussion on price-setting strategies in the retail gasoline market. Retail gasoline price data, both panel and time series, is of great interest in the economic arena since it allows the testing of many theories about price formation, oligopolistic pricing, and consumer search. In this study, we present results from a unique new dataset, including daily sales, cost, and price data from 100 retail gasoline stations in a western European country. With this data, we empirically test various economic models to confirm, in full or in part, some earlier results based on North American data. We discuss a special case in which we empirically fit a model where retailers set prices partly in response to local competitors' prices.

  Link(s) to publication:

  http://dx.doi.org/10.1504/IJRM.2015.073818

• Anderson, C. K.; Odegaard, F.; Wilson, J. G., 2015, "A newsvendor approach to inventory and pricing decisions in NYOP channels", Journal of Revenue and Pricing Management, February 14(1): 3 - 15.

  Abstract: In opaque selling certain characteristics of the product or service are hidden from the consumer until after purchase, transforming a differentiated good into somewhat of a commodity. Opaque selling has become popular in travel service pricing as it allows firms to sell their differentiated products at higher prices to regular brand loyal customers while simultaneously selling to non-loyal customers at discounted prices. At its simplest level, the process can be regarded as a Newsvendor problem where a supplier has to make both pricing and quantity allocation decisions for a perishable good or service. As the originator of opaque selling, Priceline.com provides unique data to sellers that allows them to better utilize their opaque selling mechanism. Recently Priceline has made some changes to their mechanism that have potential impacts on how firms set prices and control inventory within the channel. In this framework, the problem has the characteristics of Newsvendor problems with multiple price points. In this article, we develop optimal pricing and inventory policies for a seller releasing inventory to an opaque sales channel. Furthermore, we investigate the impacts of Priceline’s changes upon optimal prices and inventory allocation policies. The model is empirically illustrated using Priceline data for a 3.5 star hotel.

  Link(s) to publication:

  http://dx.doi.org/10.1057/rpm.2014.32

• Odegaard, F.; Roos, P., 2014, "Measuring the Contributions of Workers' Health and Psychosocial Work-Environment on Production Efficiency", Production and Operations Management, December 23(12): 2191 - 2208.

  Abstract: Increasingly many firms have started to implement programs intended to improve the workers' health and the psychosocial work-environment, as well as other attributes of labor quality. Motivated by the need for evaluating to what extent the programs affect a firm's productivity performance, this study discusses a model for analyzing the contribution of labor quality attributes toward firm productivity. To assess the contribution from the labor quality attributes, we model firm productivity as the outcome of two separate processes within a firm: the physical production process and the labor quality process. Firm productivity is measured by a Malmquist-like productivity index and is computed by Data Envelopment Analysis. Based on bootstrap methods we analyze potential statistical bias and provide bias-corrected productivity estimates. The labor quality attributes are first modeled at an individual worker level as latent variables using Item Response Theory, and then aggregated to a firm-level. The model is empirically validated using data from three manufacturing plants that participated in a coordinated worksite health promotion program. Over a 4-year period (20002003), we observed a general improvement in efficiency of 25%, half of which could be attributed to an improvement in workers' health and psychosocial work-environment. A key benefit with the model is that it is practical, easy to implement, and very fast to compute. The model also constructively contributes to the discourse on sustainability by providing a framework for deriving meaningful metrics and providing tangible measurements on the effect of sustainability-related issues.

  Link(s) to publication:

  http://dx.doi.org/10.1111/poms.12242

• Borg, S.; Palaszewski, B.; Gerdtham, U.; Odegaard, F.; Roos, P.; Gudbjornsdottir, S., 2014, "Patient Reported Outcomes Measures and Risk Factors together in Quality Register for More Patient-Centred Diabetes Care in Sweden", International Journal of Environmental Research and Public Health, December 11(12): 12223 - 12246.

  Abstract: Diabetes is one of the chronic diseases that constitute the greatest disease burden in the world. The Swedish National Diabetes Register is an essential part of the diabetes care system. Currently it mainly records clinical outcomes, but here we describe how it has started to collect patient-reported outcome measures, complementing the standard registry data on clinical outcomes as a basis for evaluating diabetes care. Our aims were to develop a questionnaire to measure patient abilities and judgments of their experience of diabetes care, to describe a Swedish diabetes patient sample in terms of their abilities, judgments, and risk factors, and to characterize groups of patients with a need for improvement. Patient abilities and judgments were estimated using item response theory. Analyzing them together with standard risk factors for diabetes comorbidities showed that the different types of data describe different aspects of a patient’s situation. These aspects occasionally overlap, but not in any particularly useful way. They both provide important information to decision makers, and neither is necessarily more relevant than the other. Both should therefore be considered, to achieve a more complete evaluation of diabetes care and to promote person-centered care.

  Link(s) to publication:

  http://dx.doi.org/10.3390/ijerph111212223

• Odegaard, F.; Anderson, C. K., 2014, "All-Pay Auctions with Pre- and Post-Bidding Options", European Journal of Operational Research, December 239(2): 579 - 592.

  Abstract: Motivated by the emergence of online penny or pay-to-bid auctions, in this study, we analyze the operational consequences of all-pay auctions competing with fixed list price stores. In all-pay auctions, bidders place bids, and highest bidder wins. Depending on the auction format, the winner pays either the amount of their bid or that of the second-highest bid. All losing bidders forfeit their bids, regardless of the auction format. Bidders may visit the store, both before and after bidding, and buy the item at the fixed list price. In a modified version, we consider a setting where bidders can use their sunk bid as a credit towards buying the item from the auctioneer at a fixed price (different from the list price). We characterize a symmetric equilibrium in the biddingbuying strategy and derive optimal list prices for both the seller and auctioneer to maximize expected revenue. We consider two situations: (1) one firm operating both channels (i.e. fixed list price store and all-pay auction), and (2) two competing firms, each operating one of the two channels.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.ejor.2014.06.011

• Mahjoub, R.; Odegaard, F.; Zaric, G. S., 2014, "Health-Based Pharmaceutical Pay-for-Performance Risk-Sharing Agreements", Journal of the Operational Research Society, April 65(4): 588 - 604.

  Abstract: Many new drugs, such as biologics and cancer drugs, are very costly. However, their effectiveness outside of clinical trial settings is often uncertain at the time they gain market approval. This uncertainty may reflect a lack of real-world outcomes data, as opposed to clinical trials data, for a typical patient population. A risk-sharing agreement is a contract between a drug manufacturer and a healthcare payer to help manage uncertainties regarding the cost and effectiveness of those drugs. In this paper, we model a risk-sharing agreement in which a proportion of total sales is rebated. We model disease progression using a continuous time Markov chain with uncertain transition rates. We examine the performance of this risk-sharing agreement from the manufacturer’s perspective and investigate the conditions under which the manufacturer will make a profit. We illustrate with a numerical model parameterized using data from a Phase 2 clinical trial of an oncology drug that was subjected to a risk-sharing agreement in the UK.

  Link(s) to publication:

  http://dx.doi.org/10.1057/jors.2013.106

• Odegaard, F.; Roos, J., 2013, "Measuring Worksite Health Promotion Programs: An Application of Structural Equation Modeling with Ordinal Data", European Journal of Health Economics, The, July 14(4): 639 - 653.

  Abstract: This paper presents a model for measuring the outcome of Worksite Health Promotion Programs through an application of Structural Equation Modeling with ordinal data. We model the function 'being healthy' as a vector comprised of three latent or unobservable variables: Health Status, Lifestyle and Stress. Each variable can be measured only indirectly through a set of manifest or observable ordinal indicators. The objective is to derive and analyze the distributions, and changes in distributions over time, of the latent variables on an individual level. The model is analyzed empirically on data from three large Swedish manufacturing firms.

  Link(s) to publication:

  http://dx.doi.org/10.1007/s10198-012-0409-4

• Odegaard, F.; Puterman, M. L., 2012, "Estimating intermediate price transitions in online auctions", Applied Stochastic Models in Business and Industry, December 28(6): 529 - 541.

  Abstract: This paper discusses a statistical model regarding intermediate price transitions of online auctions. The objective was to characterize the stochastic process by which prices of online auctions evolve and to estimate conditional intermediate price transition probabilities given current price, elapsed auction time, number of competing auctions, and calendar time. Conditions to ensure monotone price transitions in the current price and number of competing auctions are discussed and empirically validated. In particular, we show that over discrete periods, the intermediate price transitions are increasing in the current price, decreasing in the number of ongoing auctions at a diminishing rate, and decreasing over time. These results provide managerial insight into the effect of how online auctions are released and overlap. The proposed model is based on the framework of generalized linear models using a zero-inflated gamma distribution. Empirical analysis and parameter estimation is based on data from eBay auctions conducted by Dell.

  Link(s) to publication:

  http://dx.doi.org/10.1002/asmb.928

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