Abstract
This paper studies strategic customer behavior in a monopolistic seller system. Given the stock quantity and the selling prices, a customer chooses either to buy at the full price to certainly obtain a product or to wait for a discount with the risk of stockout. We model the behavior of strategic customers as a customer-game. It is shown that the customer-game may have multiple Nash equilibria. Specifically, in the condition of weak incentive compatibility, the trembling hand perfect equilibrium is “all-wait”, which is inconsistent with the “all-buy” assumption in the literature. We conduct laboratory experiments to investigate behavior of strategic customers. The results show that customers' behaviors exhibit a deviation from Nash equilibria. Using a framework of quantal response equilibrium, we develop behavioral models to effectively characterize the behavior of strategic customers.
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