Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195802 
Year of Publication: 
2018
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 6 [Issue:] 1 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-12
Publisher: 
MDPI, Basel
Abstract: 
Prospective customers of financial and insurance products can be targeted based on the profit the provider expects to earn from them. We present a model for individual expected profit and two alternatives for calculating optimal personalized prices that maximize the expected profit. For one of these alternatives, we obtain a closed-form expression for the price offered to each prospective customer; for the other, we need to use a numerical approximation. In both approaches, the profits generated by prospective customers are not immediately observed, given that the products sold by these companies have a risk component. We assume that willingness to pay is heterogeneous and apply our methodology using real data from a European insurance company. Our study indicates that a substantial boost in profits can be expected when applying the simplest optimal pricing method proposed.
Subjects: 
sales optimization
optimal price
price elasticity
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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