Essays on dynamic pricing and operational flexibility in managing capacity and inventory of agile supply chains

This dissertation studies dynamic pricing and operational flexibility in managing capacity and inventory of agile supply chains. The first essay studies dynamic pricing of a single product for general demand models. The second essay investigates multi-product dynamic pricing with demand substitution modeled by the Multinomial Logit model. The third essay explores the valuation of a product mix.;The first essay studies dynamic pricing of a single product in the context of revenue management. We use a discrete approximation approach to solve the standard intensity control problem for general demand models. We show that the approach is accurate and efficient. We compare the performance of dynamic pricing and static pricing. We find that the value of dynamic pricing is significant so long as inventory is not abundant. We provide useful managerial insights for the retailer on when to adopt dynamic pricing and when to switch between the two pricing policies.;The second essay investigates dynamic pricing and inventory control of substitute products. We develop a stochastic intensity control formulation and derive the optimal pricing policy. We identify two fundamental underlying driving forces of the price behavior: the inventory scarcity and the quality difference. We compare the performance of three restricted pricing strategies: static, unified dynamic, and mixed dynamic pricing. We present a computationally efficient approach to the initial inventory decision.;The third essay explores the valuation of a product mix using a real option approach. We propose a three-stage sequential decision model to analyze the manufacturer's decisions of initial investment level, selection of quality levels, capacity commitment, production and pricing. The total demand is a stochastic process and the market shares are determined by the Multinomial Logit model. We use a real option approach to value the future risky profit. We provide optimal solutions and explore optimal properties. We conduct a numerical study to understand the effects of demand variance, market heterogeneity and cost structures, as well as the value of postponement and product mix.