Fee schedule design when debt collection is price sensitive
Cinthia Perez
Abstract:
Keywords– Pricing, willingness to pay, collected revenue.
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Fee schedule design when debt collection is price sensitive | ||
| Published in: | Proceedings of the 13th Latin American and Caribbean Conference for Engineering and Technology: Engineering Education Facing the Grand Challenges, What Are We Doing? | |
| Date of Conference: | July 29 - 31, 2015 | |
| Location of Conference: | Santo Domingo, Dominican Republic | |
| Authors: | Andres G. Abad Cinthia Perez | |
| Refereed Paper: | #244 | |
Abstract: | ||
| When payment for a good (or service) is not
required to be done inmediately after its delivery, collection
in full may not be possible. This is critical for post-paid
billing systems such as mobile phone, water, electricity, and
other utility service providers. In order to maximize their
revenue, firms of these characteristics must not focus solely
on increasing sales; instead, more importantly, they should
focus on increasing collection. Thus, pricing should consider
not only the good’s demand elasticity, but also market’s
payment capacity—or its willingness to pay. We propose a
linear programming model that can be used to maximize a
firm’s revenue collection over a one-period decision horizon.
Our model works by segmenting customers based on their
consumption level and assumes that customer’s willingness
to pay is similar within each segment. Prices are, then, found
for each customers’ segment. A case study is provided and
its solution analyzed to develop further insights about the
model.
Keywords– Pricing, willingness to pay, collected revenue. | ||