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Application of complex adaptive systems

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ARTICLE in DECISION SUPPORT SYSTEMS FEBRUARY 2008

Impact Factor: 2.04 DOI: 10.1016/j.dss.2007.10.005 Source: DBLP

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Moutaz Khouja Mirsad Hadzikadic

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Decision Support Systems 44 (2008) 725 739

www.elsevier.com/locate/dss

Application of complex adaptive systems to pricing of reproducible

information goods
Moutaz Khouja a,, Mirsad Hadzikadic b,1 , Hari K. Rajagopalan c,2 , Li-Shiang Tsay d
a
Business Information Systems and Operations Management Department, The Belk College of Business Administration,
The University of North Carolina at Charlotte, Charlotte, NC 28223, United States
b
College of Information Technology, The University of North Carolina at Charlotte, Charlotte, NC 28223, United States
c
School of Business, Francis Marion University, Florence, SC 29501, United States
d
Department of Computer Science, Hampton University, Hampton, Virginia 23668, United States

Received 1 August 2005; accepted 1 February 2007

Available online 13 October 2007

Abstract

Piracy of copyrighted information goods such as computer software, music recordings, and movies has received increased
attention in the literature. Much of this research relied on mathematical modeling to analyze pricing policies, protection against
piracy, and government policies. We use complex adaptive systems as an alternative methodology to analyze pricing decisions in
an industry with products which can be pirated. This approach has been previously applied to pricing and can capture some aspects
of the problem which are difficult to analyze using traditional mathematical modeling. The results indicate that advances in
technology make a skimming strategy the least preferable approach for producers. Further, improvements in technology, more
specifically data communications and the Internet, will erode the profitability of a skimming strategy. The analysis also indicates
that complex adaptive systems may provide a useful method for analyzing problems in which interactions between participants in
the systems, i.e. consumers, sellers, and regulating agencies, are important in determining the behavior of the system.
2007 Elsevier B.V. All rights reserved.

Keywords: Information goods; Pricing; Piracy; Complex adaptive systems

1. Introduction increase the consumer base for a product and creates

Piracy of copyrighted products has become a major
problem for many firms. Tolerating some piracy may
The authors would like to thank the referees for their helpful
comments and suggestions.
Corresponding author. Tel.: +1 704 687 3242; fax: +1 704 687
6330.
E-mail addresses: mjkhouja@email.uncc.edu (M. Khouja),
mirsad@uncc.edu (M. Hadzikadic), hrajagop@fmarion.edu
(H.K. Rajagopalan), li-shiang.tsay@hamptonu.edu (L.-S. Tsay).
1
Tel.: +1 704 687 3124; fax: +1 704 687 6979.
2
Tel.: +1 843 661 1501; fax: +1 661 1432.
0167-9236/$ - see front matter 2007 Elsevier B.V. All rights reserved.
doi:10.1016/j.dss.2007.10.005
positive network externalities, which refer to a case
where a consumer's utility from a software increases
with the number of its users [21,25]. In that respect,
having more consumers use a software makes it more
valuable to others. These positive aspects are less im-
portant in the recorded music and movie industries.
Conner and Rumelt [10] examined protection strategies
in the presence of positive network externalities. Their
analysis indicates that, in the presence of positive net-
work externalities, a strategy of no protection can result
in lower price and increased profit. The authors show
that network externalities have a strong effect under
726 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
three conditions: (1) The software is complicated and
difficult to master, (2) the software allows or demands
extensive user customization, or (3) the software is useful
for multiple-user data processing or formal networking.
For example, a user would rather use Microsoft Word over
Word Perfect if most users are using Microsoft Word for
word processing. This is because using the software
makes it easier for a user to share documents with others.
Some users may therefore be willing to pay more for
Microsoft Word. However, in case of music and movies
the three conditions identified by Conner and Rumelt [10]
are not present.
Industries susceptible to piracy are usually dominat-
ed by monopolists who obtain monopoly power through
copyright and intellectual property protection. Like
other monopolies, they are viewed unfavorably because
they tend to charge higher prices than what would
prevail under competition. For example, while Napster
was being shut down after having been accused of
contributing to piracy, major record labels in the music
industry, such as Sony, and EMI, were accused of
violating fair trade practices by threatening retailers
not to advertise compact disks (CDs) below certain
prices [4].
Among the industries suffering from piracy, recorded
music seems to be the worst hit. Pirating music has
become much easier due to digitization, the adoption of
compression technologies such as MP3, and easy access
to digitized music files on the Internet. The Recording
Industry Association of America's (RIAA) 2003 sta-
tistics show that both the number and the dollar value of
CD sales have declined since 2001. In 2003, sales of
music CDs were $11.2 billion compared to a peak of
$13.2 billion in 2000. Also, since the launch of Napster
in 1999, sales of CD singles have been decreasing at a
remarkable rate till 2002. This is, in part, due to the fact
that compressing one song into an MP3 file makes it
easy to swap. Although Napster, once the most popular
music-swapping site, was shut down in an effort to
prevent piracy by the big record labels, alternative file
sharing through P2P networks, such as Kazaa, WinMX,
and Gnutella, immediately replaced Napster. These P2P
networks do not require a central server to store files,
thus avoiding possible litigation.
The marketing and economics literature delineates
the different pricing strategies a firm can follow under
different conditions [22]. These conditions include de-
gree of product differentiation, the competitive situa-
tion, and the nature of demand. Skimming and
penetration are the classic strategies for pricing new
products [22,29]. A skimming strategy is one in which
a firm sets a high initial price and then systematically
reduces it. In a monopoly market, which is the case for
many information goods, the monopolist is certain that
the entire market demand is its own. Therefore, a
skimming strategy can be used to exhaust the market
[12]. The initial price is aimed at consumers for whom
obtaining the product early is important and who are
willing to pay a premium for early ownership. As this
segment becomes saturated, price is reduced to increase
the appeal of the product [11]. This strategy is most
appropriate when products are highly differentiated, a
segment of the market is price-insensitive, and there are
limited economies to scale or learning curve effects.
Pricing in a skimming strategy maximizes profit based
on what the market can bear and the product's worth to
buyers [11,21]. The increased margins which skimming
brings should be balanced against the decreased sales
volume.
Since a skimming strategy is suitable when a com-
pany has a temporary monopoly position [22], it is ideal
for producers of copyrighted products such as movies
and music recordings. These firms enjoy a natural mo-
nopoly position and can skim the market for as long as
their intellectual property is protected. However, piracy
may erode monopoly power even without competitors
entering the market.
Determining prices in a market where some piracy is
unavoidable is a complex problem which is difficult to
analyze using traditional mathematical modeling. The
difficulty arises in modeling the act of piracy itself. For a
consumer to pirate a product, the following prerequisites
are needed: 1) the consumer does not have a copy of the
product, 2) the value the consumer attaches to the
product exceeds the cost of the copying medium and the
risk of being caught and penalized, 3) the consumer
prefers pirating to purchasing a legitimate product (be-
cause his/her reservation price is not met or the expected
gain from piracy exceeds the expected gain from
purchase), 4) the consumer knows another consumer,
i.e. neighbor, with a reproducible copy, and 5) the
consumer or one of his/her neighbors has access to the
duplication technology. Therefore, the rate of piracy at a
point in time depends on the diffusion of both legitimate
and pirated copies (when copies can be made from
copies) in the market up to that point and on consumer
connectivity. We define consumer connectivity as the
number of neighbors, physical or via a computer
network, that a consumer can share copies with. Com-
plex adaptive systems (CAS) and agent-based modeling
(ABM), which is a flexible approach to modeling CAS,
may provide a useful methodology for analyzing pricing
decisions under piracy. CAS and ABM have been
previously applied to pricing problems in a two-firm
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
market where consumers' purchase decisions are solely
based on price [34].
The objectives of this paper are to 1) provide an
alternative methodology for analyzing the problem of
piracy, 2) find an optimal monopolist's pricing strategy in
a market where some piracy is unavoidable, 3) investigate
the impact of piracy on consumers, monopolists, and
artists, and 4) evaluate the applicability of CAS to busi-
ness problems, and more specifically pricing.
The key results are 1) consumer connectivity has a
strong impact on optimal pricing strategy, 2) strong
consumer connectivity erodes the profitability of a
skimming strategy, 3) requiring a legitimate product to
make a copy does not significantly lessen the impact of
piracy on profit when consumer connectivity is strong,
4) deterrent piracy controls must significantly increase
consumers' risk and cost of piracy to be effective, and
5) CAS offer an effective platform for understanding the
combined effects of many variables on pricing.
The paper is organized as follows. Section 2 offers a
review of the literature. In Section 3, we introduce CAS
and describe their use in problem solving. In Section 4,
we develop a CAS for analyzing a monopolist's pricing
policy in a market with piracy. In Section 5, we discuss
the results from several experiments conducted using
the developed system. Section 6 concludes with sum-
mary of findings and future research on applying CAS to
business problems.
2. Literature review
Piracy has had a major impact in the computer soft-
ware industry. Research on software piracy mainly deals
with pricing, copyright protection, and government pol-
icies. Nascimento and Vanhonacker [21] found that a
skimming strategy is optimal in the absence of piracy.
Using the diffusion of innovation model, they also
found that copy protection is recommended when sales
grow faster than piracy and the cost of protection
does not significantly increase the marginal cost. Givon,
Mahajan and Muller [13] showed a positive side to
piracy with a software diffusion model.
Prasad and Mahajan [25] examined the relationship
between the rate of software diffusion and piracy to
determine the price and the piracy level that should be
tolerated. The authors examined three cases: A monop-
oly, a monopoly with multiple generations of software,
and a competitive market. Their results indicate that a
monopoly should have little piracy protection at the
early stages of the software's life and impose maximum
protection in the second half of the life cycle. For multi-
generation software monopolist, the first generation
727
should have less protection than in the monopoly case
only if profit margins are expected to decline in sub-
sequent generations. For the competitive case, less pro-
tection should be used than in the monopoly case.
Haruvy, Mahajan, and Prasad [17] examined how piracy
affects the adoption of subscription software. In this
model the producer determines the price and the
protection level which maximize the discounted profit
stream over the product's life. The results indicate that
moderate tolerance for piracy can speed up adoption and
enables the producer to charge higher prices. Tolerance
for piracy decreases when market penetration is quick,
information is imprecise, and positive network exter-
nalities are low.
Sundararajan [31] analyzed optimal pricing and
piracy protection for a monopolist using price discrim-
ination among consumers who are willing to buy var-
iable quantities of a digital good. The author shows that
the optimal pricing schedule can be characterized as a
combination of zero-piracy pricing and piracy-indif-
ferent pricing schedules. Other findings by network
externality-based studies [10,28,32] also indicate that
allowing piracy can make the producer more profitable
when positive network externality exists.
Chen and Png [7] developed a model that incorpo-
rates a piracy penalty set by the government. The
monopolist determines price and piracy monitoring rate.
Users can buy the product, pirate it, or not use it. The
authors show that changes in pricing and monitoring
rates have qualitatively different effects on consumers.
They also show that from a social welfare perspective,
price reductions are better than increased monitoring.
Chen and Png [8] extended the model to include a tax on
copying media and equipment and a government sub-
sidy for legitimate purchases. Consumers are divided
into ethical and unethical groups. The results indicate
that taxing the copying media is better from a social
welfare standpoint than penalizing piracy, and that the
best government policy is to subsidize legitimate pur-
chases. Belleflamme [2] considers a case in which
copies are of lower quality than originals. He shows that
although diffusion through piracy increases social
welfare, this comes at the expense of the producer's
profits, which may be insufficient to cover the creation
cost.
Chellappa and Shivendu [5] analyzed the implica-
tions of variable technology standards in the movie
industry. They concluded that when piracy is prevalent,
maintaining separate technology standards between dif-
ferent regions is beneficial to the producer. In addition,
it is not only the producer who incurs losses due to
global piracy but also the consumers in regions where
728 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
quality is important. In a more recent study, Chellappa
and Shivendu [6] assume that consumers are not fully
aware of the true fit of an information good to their tastes
until consumption. In this model, piracy offers a con-
sumption opportunity before purchase. The authors de-
velop a two-stage model of a market composed of
heterogeneous consumers in their marginal valuation for
quality and their moral costs. Some consumers pirate the
product in the first stage and based on that experience
update their fit-perception which may cause them to re-
evaluate their buying/pirating decision in the second
stage. An important result from the model is that piracy
losses are more severe for products that are overvalued in
the market and ultimately do not live up to their reputation
rather than for products that have been undervalued in the
market and turn out to be a good surprise.
Papadopoulos [23] investigated the relationship be-
tween price, copyright law enforcement, and formation
of black markets. Data for music recordings was used to
fit a regression model to estimate the relationship be-
tween legitimate music recording price, black market
distribution channels and piracy. The author found that
piracy in a country is most strongly related to the ratio of
average hourly wage to the average sound recording
price and to a lesser degree, to a black market efficiency
index. Wang [38] analyzed motion picture piracy and
found a positive relationship between perceived cost
benefits of a pirated copy and intent to purchase a
pirated copy. The likelihood of purchasing a pirated
copy is not dependent on individual income but rather
on the perceived benefit relative to the cost of a pirated
copy. In addition, the results indicate a negative re-
lationship between the variables of perception of per-
formance risk, ethical concern regarding piracy, and
perception of social norms opposed to piracy and the
intent to purchase a pirated copy. Other recent behav-
ioral studies on piracy in the music and software in-
dustry have been undertaken by Chiou, Huang, and Lee,
[9] and Moores and Chang [20], respectively.
Related to copyright protection, an interesting find-
ing by Gopal and Sanders [14] is that deterrent controls,
which employ educational and legal campaigns, protect
the producer's profit better than preventive controls that
use technology to make piracy difficult. Also, deterrent
controls were shown to be superior from social welfare
perspective.
A unique aspect of the music and movie industries is
the royalty system. Record labels usually pay per unit
royalty to artists ranging from 5% to 25% of the sale
price or a fixed amount per unit sold. An artist who gets
royalty was once considered one of the victims of
piracy. However, a recent report from Pew Internet &
American Life Project reveals that many artists do not
feel that digital file sharing hurts them [26].
Many of the above models have focused on one or
two aspects of piracy in order to maintain mathematical
tractability. For example, some models have focused on
network externalities, some on price and protection
level, some on price and government policy, and some
on varying technology standards. Incorporating several
piracy aspects into a single model complicates the ana-
lysis and makes insights into the interaction effects of
these factors difficult to obtain. Piracy is a dynamic
problem in which the time element is essential. The level
of piracy at a point in time depends both on the number
of legitimate and pirated copies of the product available
in the market. This makes the time of price changes to
increase revenue a critical part of decision making.
Finally, products susceptible to piracy are usually short-
lived products with consumer interest waning quickly
over time. All of these aspects make CAS and ABM a
useful alternative methodology for incorporating the
many aspects of piracy.
Despite the fact that CAS were introduced over
30 years ago [18,19], there is little research on their use
for solving business problems. This is may be due in part
to the difficulty in representing key elements of busi-
ness problems such as key levers, constituent agents,
negotiations, rewards, fitness, etc. There have been some
attempts to advance the state of knowledge of applying
CAS to business problems. For example, Ben Said,
Bouron, and Drogoul [3] used agent-based modeling
(ABM) in a consumer market. The authors proposed a set
of behavioral primitives for consumer agents which
include imitation, conditioning, mistrust, and innova-
tiveness. The system incorporates opinion leaders whose
opinions are highly valued by consumers. Consumers
learn over time and genetic algorithms are used for the
evolution of consumers. The authors use ABM to pro-
vide operational and conceptual richness to capture a
broad range of consumer behavior. This study illustrates
the difficulty in capturing and generalizing key elements
of agents' behavior.
ABM and CAS have been used to analyze pricing
decisions under limiting assumptions without piracy.
Tesauro and Kephart [34] analyzed pricing decisions of
two firms selling an identical product. Consumers
were assumed to behave deterministically and prefer the
product with lower price. Sellers alternate in setting price
for each period with full knowledge of the competitor's
price and profit. The authors investigated the effects of
using Q-learning on the sellers' behavior. Q-learning is an
algorithm that incorporates long-term rewards into
reinforcement. The results indicate that pricing policies
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
derived with Q-learning reduce price wars and increase
profitability. The results support earlier conclusions on the
benefits of incorporating long-term consequences of
actions into the learning reinforcement [33,37]. ABM
has been used in other business applications such as to
study the performance of a supplier selection models [36]
and explore bidding strategies for market-based schedul-
ing [27].
The proposed application provides a step in the long-
term process of effectively applying CAS to business
problems. It includes the identification of a) appropri-
ate agents, b) their key properties, c) mechanisms for
agents' learning, d) agents' goals, e) fitness functions,
and f) key performance indicators. The subsequent steps
in the development of CAS for solving business prob-
lems include refinements to the proposed CAS to better
capture the above key elements, the addition of more
agents to the system such as government and regulating
agencies, and implementing learning for all agents in the
system.
3. Agent-based modeling and Complex Adaptive
Systems
Complex Adaptive Systems and ABM are bottom
up approaches for analyzing and understanding complex
systems. We focus on a particular implementation of
Complex Adaptive Systems (CAS) known as ABM.
Entities in the system are modeled as agents whose
behavior mimics that of real entities. Agents act ac-
cording to their rules/schema. Agents can have a high
degree of heterogeneity or be very similar. The actions
and interactions of the agents in the system result in an
aggregate behavior of the system [35]. Agents in busi-
ness models are the actual players in the system, which
include firms, consumers, and regulatory agencies. One
can view ABM as social simulation, which is now
possible due to increased computing power [30].
Several advantages of using CAS and ABM have
been given in the literature. While these advantages may
not be unique to CAS, their combination makes this
method attractive. ABM does not require assumptions
with regard to the behavior of the system [35]. Agents
also provide a useful approach for modeling entities in
many social problems [1]. The use of ABM enables us
to use the wealth of information about agents' behavior,
motives, and interactions to examine the consequences
in terms of aggregate system behavior. Agents also
provide a method for modeling heterogeneity [35].
CAS exhibit complex non-linear behavior brought
about by interaction of agents. Agents influence the
behavior of the system while, at the same time, the system
729
influences the behavior of individual agents. The agents
interact with the environment as well. CAS are networked
in the sense that agents interact with their neighbors and,
occasionally, distant agents, and non-linear in the sense
that the whole is greater than the sum of its parts.
The main properties of CAS include self-organiza-
tion, emergence, and adaptation. Ant colonies, networks
of neurons, the Internet, the brain, and the global econ-
omy are a few examples where the behavior of the
whole is much more complex than the behavior of its
parts. Agents are autonomous entities with limited per-
ception of their environment. They are guided by few
simple rules and act locally. Agents' overall status and
behavior can be tracked and evaluated. The performance
of the overall system is derived from the effectiveness of
the individual agents and their interaction. Agents may
or may not have a history of their previous interactions
and the ability to learn from them. Information about
their past performance is used by the agents to deter-
mine the type and the degree of improvement in their
behavior.
Agent interactions are mostly local; namely, they
communicate with their immediate neighbors. Occa-
sionally, as they move about, some agents get a chance
to interact with other agents exhibiting plausible prop-
erties, regardless of the distance between the two
agents. Their behavior is driven by a few, well-chosen
rules. It is the interaction between agents, as well as the
interaction between the agents and the environment
that gives rise to the complexity of the system as a
whole.
4. Complex adaptive systems and pricing under piracy
The proposed system is developed for a firm that has a
monopoly for a copyrighted product. Each consumer has
his/her value for the product. Thus, each consumer has
his/her reservation price for the product, which is the
maximum price he/she is willing to pay. This value is
known to the consumer prior to consuming the product.
While this assumption is similar to assumptions in some
models in the literature [8], others authors assume that
consumers update their fit-perception of the product after
sampling it [6]. If the selling price is equal to or below the
reservation price, a consumer will buy the product. If the
selling price is higher than the reservation price, there is a
probability that he/she may pirate the product. The
pirating probability depends on several factors including
access to copies that can be pirated, the availability of
duplication technology, and the cost of the copying
medium. A consumer's decision to pirate also depends
on the penalty for pirating and the probability he/she
730 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
assigns to being caught. Finally, the probability of
pirating is an increasing function of the difference
between the selling price and copying cost. The goal of
the firm is to maximize total profit by periodically
adjusting prices over the finite life of the product.
In applying CAS to pricing, or any similar problem,
one must first identify the agents in the system and
their rules. Agents in this problem include one seller
and N consumers. IF/THEN rules are used to describe
an agent the IF part of the rule being the condition
or state, and the THEN part is the action. Agents need
not be homogenous and each agent has its own rules.
The effectiveness of the pricing strategy is measured
using the seller's profit. The following assumptions are
made:
1. There is only one seller.
2. The goal of the seller is to maximize profits over the
life of the product.
3. Advertising cost is a fixed amount per advertising
campaign.
4. Consumers have complete information about the
current price.
5. Each consumer may obtain only one copy of the
product, legitimate or pirated.
The following notation is used:
t 1,2,3,,T, a period index,
i 1,2,3,,N, a consumer index,
Zt profit for period t,
Pt unit selling price during period t,
Qt number of legitimate products sold in period t,
qt number of pirated copies made in period t,
ri,t reservation price of consumer i in period t,
Ri the risk cost consumer i assigns to pirating the
product,
d the cost of pirating which includes the cost of
the storage medium and excludes the risk cost,
ci,t probability of consumer i pirating the product
in period t,
hi the number of neighbors of consumer i,
At advertising cost incurred in period t, At = A if
Pt Pt 1 and 0 otherwise.
Ot per period operating cost incurred for the product,
t sum of all reservation prices of consumers
without the product at the beginning of period
t,
1 total reservation prices of all consumers prior
to the introduction of the product,
g 1,2,3,,G, an index of an action the seller may
implement at the beginning of a period,
j 1, 2,.., J, a state condition of the system
assessed at the end of each period,
g,j,t the weight assigned to state/action pair j/g at
the at the end of period t.
All variables indexed by t are dynamic in terms of
being recalculated each period in the simulation. All
parameters indexed by t are dynamic in terms of the
simulation being able to handle changes in their values
from one period to the next. For many of these
parameters (ri,t,Ot, and At), the values are kept the
same during a run of the simulation for the experiments
in order to focus on the effects of piracy.
4.1. Seller's schema
Similar to industry practice, we assume the seller
monitors sales and profit performance. As this data
becomes available each period, which can be a week, a
month, or a quarter, decisions are made and implemen-
ted. Therefore, we implement a periodic review system
in which time increases in discrete units. A life cycle
consists of T periods. For example, a movie released on
DVD may have a life cycle of up to 5 months with price
changes allowed monthly. At the end of each period, the
seller will have one of three states (i.e. j = 1,2,3):
1. the profit has increased from previous period:
Zt N Zt 1,
2. the profit has decreased from previous period: Zt b Zt 1,
or
3. the profit is the same as in the previous period:
Zt = Zt 1.
The seller may implement one of the following
actions at the beginning of period t:
1. keep the current price unchanged (i.e. do nothing),
2. discontinue the product,
3. change the price to Pt 1(1 0.05k), k [1,2,3,4,5,6].
The last action has 12 possible price changes re-
sulting in a total of 14 possible actions (i.e. g = 1,14).
Multiples of 5% change is most common in practice.
The above states and actions result in 42 state/action
pairs. The initial selling price is user specified.
However, a search for the best initial price can be
incorporated. The seller advertises the product at the
beginning of each period with a price change. At the end
of each period, the seller detects the state of the system
and takes an action, which is chosen probabilistically
based on the weights assigned to each state/action pair.
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
To ensure that each action has an equal probability of
being selected for each state at the beginning of a run,
the initial weights of each state/action pair is set to 0.01.
After executing the selected action, the weight of the
selected state/action pair is changed based on its profit
performance. During the run of the simulation, the
weight assigned to the most profitable state/action pair
increases until it has a probability close to 100% of
being selected. The speed of convergence depends on
the relative profitability of other state/action pairs. If one
state/action pair is significantly more profitable than
others, then the probability of selecting this state/action
pair approaches 100% very quickly. If there are many
state/action pairs with only slightly lower profit than the
best state/action pair, then this convergence will take
many runs of the simulation.
Fig. 1 shows flowcharts explaining the simulation for
one product lifecycle (a run of the simulation includes
Fig. 1. Flowchart of the simulation.
731
many lifecycles). Every period, buyers interested in the
product make decisions on buying, pirating, or waiting.
The buyer's process is interrupted at the end of the
period to let the seller evaluate the pricing strategy.
Based on the change in profit during the period, actions
are rewarded and a decision on which action to
implement is made. The selection of actions depends
on the weights of each state/action pair for the occurring
state. A life cycle ends only when the seller implements
the discontinue the product action. If the seller
chooses discontinue the product, the lifecycle ends
and all parameters are reset except for the weights of the
state/action pairs which the seller retains since they were
learned from past experience.
We consider two costs: An operating cost incurred
every period, and an advertising cost incurred only
when there is a price change. Since we deal with in-
formation goods, per unit cost of production is very
732 M. Khouja et al. / Decision Support Systems 44 (2008) 725739

small and, without loss of generality, we assume it to be actions some time before rewards get large is used so that
zero. Therefore, the profit per period is: no action is eliminated from consideration early in a run.

For all three reinforcement methods, at the end of
Qt Pt  A  Ot If Pt pPt1 period t, if g,j,t N 0, then the weight of state/action pair
Zt 1
Qt Pt  Ot Otherwise j/g is increased according to:
We tested three reinforcement learning methods: qg; j;t qg; j;t1 Dg;i;t for g and j of t  1 5
Short-term profit reinforcement method (STPRM):
The weight of a state/action pair at the end of a period is Therefore, when the same condition occurs again, an
increased by the amount: action's chance of being selected increases with the
profit it has provided in the past. If g,j,t 0, then a
Zt Qt Pt  Ot  A ujPt  Pt1 j
Dg; j;t 2 penalty is charged to the state/action pair by decreasing
p1 XN
its current weight by 10%. Hence, if g,j,t 0, then
ri;1
i1 qg; j;t 0:90 qg; j;t1 for g and j of t  1 6
if g,j,t N 0, where u(x) is a unit step function defined as
u(x) = 1 if x N 0 and 0 otherwise. Under this reinforce- Therefore, when the same state is realized in the
ment scheme, each state/action pair is rewarded based future, this action has a lower probability of being
on the profit it brings in the current period relative to the selected. The selection of an action for a state is
maximum total profit the product can bring. therefore based on the following procedure: If state j
Medium-term profit reinforcement method (MTPRM): occurs, then the probability of selecting action g is given
For each consumer who obtains a copy of the product, ri is by the weight of state/action pair j/g divided by the sum
set to zero since he/she is no longer willing to pay any- of the weights for all state/action pairs of state j, which
thing for the product. The weight of a state/action pair is can be written as:
increased by the amount: qg; j;t
pg; j;t1 if state j occurs in period t
Zt Qt Pt  Ot  A ujPt  Pt1 j X
G
Dg; j;t 3 qx; j;t
pt1 XN
x1
ri;t1
i1 7
if g,j,t N 0. Under this scheme, each action is rewarded 4.2. Rules N consumer agents
based on the profit it brings in the current period relative to
the total remaining profit the product can bring at the time There are N consumers and all have complete
the action is implemented. information about the current selling price. Each
Long-term profit dynamic reinforcement method consumer has his/her own reservation price. Usually,
(LTPDRM): The weight of a state/action pair is companies use past information or surveys to measure
increased by the amount: reservation prices. We assume that reservation prices
Zt pt t have a normal distribution with known mean and
Dg; j;t 0:001 standard deviation. However, the system can deal with
pt1 E
P
N any known distribution. A consumer purchases the
Qt Pt  Ot  A ujPt  Pt1 j ri;t product if his/her reservation price is met, if the
i t
0:001 reservation price is not met then a consumer may pirate
X
N E
ri;t1 the product (with some probability) if a neighboring
i1 consumer has a copy, or wait.
4 A consumer pirates the product according to the
following scheme. When the selling price is higher than
if g,j,t N 0, E is the total number of product life cycle the reservation price of a consumer who knows an agent
runs. Under this reinforcement scheme, a state/action is with a copy, he/she may pirate the product. The pirating
rewarded based on the sum of profit it brings in the probability is calculated using.
current period and the amount of profit it leaves in the
market relative to the total profit remaining in the market

 
Pt  Ri  d
at the time the action was implemented (i.e. in the ci;t min max ;0 ;1 8
previous period). In this scheme a time pressure giving ri;t
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
Table 1
Parameters used in numerical experiments
Parameter Value
Market size 10,000 consumers
Reservation prices, $ N (15,3)
Initial price, $ 8, 10, 12, 13.5, 15, 16.5, 18
Risk cost, $ N (6,2), N (3,1), 0
Cost of copying medium, $ 1, 2
Number of neighbors 0, 1, 2, 4, 8, 16
Advertising cost, $ 900, 3600
Operating cost per period, $ 1200, 4800
Pirating technology Copy from original, copy from copy
Seller's reinforcement method STPRM, MTPRM, LTPDRM
Eq. (8) implies that if the sum of the copying and
consumer risk costs is greater than the selling price, then
the consumer will not pirate. Otherwise, the probability
of pirating increases as the difference between the
selling price and the sum of the copying and risk costs
increases. For each buyer, a uniform random variable is
drawn from the interval [0,1] and if the number is
smaller than ci,t, then he/she pirates. We assume that
consumers' pirating risk costs are random variables
from a normal distribution, however the system can
handle any specified distribution.
We deal with two cases of the technology of piracy.
In the first one, copies can be made only from legitimate
copies and making copies from copies results in
unacceptable degradation in quality. This is the case
with audio and videocassette tapes and will be referred
to as copy from original (CFO). In the second case,
copies can be made from legitimate copies or from other
copies without significant degradation in quality. This is
the case with digital media such as music CDs and
digital video disks (DVD) and will be referred to as copy
from copy (CFC).
We assume that a consumer may be connected to
other consumers (neighbors) and use different sizes of
neighborhoods to observe the effects of technology. In
the past, a consumer needed to have a physical
legitimate copy of a product in order to copy it. The
Internet and file compression technologies have elim-
inated such a requirement. This implies that a
consumer's neighborhood is no longer defined by his/
her physical space, but rather by his/her technological
network. If the number of neighbors is one, then a
consumer located at coordinate (xi, yi) has a neighbor at
(xi, yi + 1). If there are two neighbors, then there is an
additional neighbor at (xi, yi 1). For four neighbors,
there are two additional neighbors at (xi + 1, yi) and
(xi 1, yi). If a consumer has eight or sixteen neighbors,
then they are located closest to him/her on the two-
dimensional grid.
733
5. Results from running the system and managerial
implications
The system was developed using JBuilder 9 on a PC
with a Pentium 4 and 1.0 GHz. Several experiments
were conducted to test the system and examine the
managerial insights it provides. The system was run
with the parameters shown in Table 1.
The total number of parameter combinations (in-
cluding the pirating technology and the seller's
reinforcement method) is 7 3 2 6 2 2 2 3 =
6048. The system was run with each possible parameter
combinations for the same randomly generated popula-
tion of consumers. Each run consisted of 1000 product
life cycles, each with duration T (the time from the
introduction of the product until the discontinue the
product action is selected). Therefore, the simulation
allows the seller to learn from selling many similar
products each having a product life cycle of several
periods (weeks or months). The seller's behavior and
results from the most profitable life cycle, which was the
most frequently occurring (learned) seller's behavior for
majority of problems, was used for the analysis.
Of the three seller reinforcement methods, LTPDRM
(long-term profit dynamic reinforcement method) and
STPRM (short-term profit reinforcement method) were
found to perform best. Surprisingly, MTPRM (medium-
term profit reinforcement method) did not perform as
well as STPRM. The differences in the total maximum
profits from using the different reinforcement meth-
ods were small. For example, LTPDRM outperformed
STPRM by 1.55% (in terms of profit) for the CFC case
whereas STPRM outperformed MTPRM by 0.68%.
Since LTPDRM and STPRM performed best, we use the
results from them for the analysis.
5.1. Identifying a good pricing strategy
The system can be used to identify a good, possibly
optimal, pricing strategy for the seller. For example,
Table 2
Identifying a good pricing strategy using CAS
Number Optimal pricing Number Number of Profit
of of pirated legitimate
neighbors products products
0 $16.50 $13.20 $9.90 0 9584 $103,889
1 $13.50 $9.45 1123 8740 $93,920
2 $12.00 975 8414 $92,568
4 $12.00 1228 8414 $92,568
8 $12.00 1378 8414 $92,568
16 $12.00 1478 8414 $92,568
734 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
Fig. 2. Profit as a function of initial price for different consumer
connectivity CFC and STPRM, At = $3600, O = $4800, Ri = 6, and
d = $1.
Table 2 shows the optimal pricing strategy for E(Ri) =
$6.00, d = $1.00, O = $4800, A = $3600, CFO, and
LTPDRM. As the table shows, under no piracy (i.e.
zero neighbors), it is best to introduce the product at a
price of $16.50, reduce the price to $13.5 in the next
period, and then to $9.90 in the last period before dis-
continuing the product. The total profit in this case is
$103,889. If each consumer is connected to two neigh-
bors, then it is best to use a single price of $12.00 and the
total profit is $92,568. It is possible to use different
initial prices to find a better strategy for each level of
consumer connectivity. For example, for the case of 1
neighbor, since $13.50 was the best initial price out of
the seven tested initial prices, an experiment with initial
prices between $12.00 and $15.00 with increments of
$0.50 can be performed.
5.2. Piracy and the effectiveness of skimming strategies
Piracy reduces the effectiveness of a skimming strat-
egy, which the literature indicates to be the most suitable
strategy for monopolists with no piracy. Before im-
provements in technology led to increased piracy, firms
operated on or close to the top curve of Fig. 2 (i.e. little
or no piracy). However, as the curve shows, starting
with a high price and reducing that price over time is less
effective as the number of neighbors increases. When
the number of neighbors is 4 or more, which is common
nowadays due to the Internet, it is best to use a single
price of $12 per unit. The skimming strategy may be
very suboptimal when the number of neighbors is large.
5.3. Impact of consumer connectivity on profit
The number of neighbors, i.e. connectivity of con-
sumers, has a strong effect on profits in both the CFO
and CFC cases. Fig. 3 shows the profit for both CFC and
CFO for different number of neighbors for an initial
price of $16.50. As the figure shows, the effect of
consumer connectivity on profit is strongest when the
number of neighbors is small (less than 8 neighbors). The
worst scenario for the monopolist is when consumers
have high connectivity and copies can be made from
copies. Unfortunately this is the situation many firms
face today due to the availability of most products in
digitized form, the good quality of compression tech-
nology, the decreased cost of bandwidth, and the low
cost of CD burners. In this respect, piracy reduces the
monopoly power firms in the music and movie in-
dustries enjoyed in the past.
5.4. Impact of consumer connectivity and initial price
on diffusion of pirated copies
The number of neighbors has a strong impact on the
rate of diffusion of pirated copies in the market, especially
when the initial price is high. As Fig. 4 shows, a
significant increase in the number of pirated copies begins
to appear for 4 neighbors as compared to 2 and 1
neighbors at an initial price of about $13.50. The implies is
that while the number of copies in the market may remains
relatively unchanged, using high initial price changes the
mix of these products in favor of pirated copies.
5.5. Impact of copying medium and risk costs on profit
In many cases, firms selling reproducible products
such as music CDs increase their deterrent controls to
curtail piracy and to maintain a skimming approach to
the market. Some governments have even added a tax on
the copying medium and equipment to deter piracy and
compensate the sellers [5]. The success of a skimming
strategy will largely depend on the ability of a firm to
increase the piracy risk cost of consumers. Fig. 5 shows
that the increase in the risk cost has to be large in order
for it to have an impact on the success of a skimming
strategy. At an initial price of $18.00, an increase of
consumer pirating risk cost from 0 to an average of
Fig. 3. Profit as a function of number of neighbors STPDRM, At =
$3600, O = $4800, Ri = 6, d = $1 and P1 = $16.50.
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
Fig. 4. Diffusion of pirated copies as a function of initial price for
different consumer connectivity CFC, STPRM, At = $3600, O = $4800,
Ri = 6, and d = $1.
$6.00 and an increase in the copying medium cost from
$1 to $2 result in about $5000 increase in profit. For this
investment in deterrent control to be successful, the
additional revenue from taxing the copying medium and
the additional $5000 increase in profit must be larger
than the expenditure on deterrent controls needed to
increase the risk cost. This may explain the strength of
the campaigns of the record labels in litigating against
individual pirates to substantially increase their assess-
ment of the risk of being caught and the size of the
penalties. However, Fig. 5 indicates that decreasing the
initial price is much more effective in increasing profit
than increasing the expenditure on piracy controls.
5.6. Piracy is becoming a more significant factor with
time
In the early 1990s, the major technology for music
and movie distribution was magnetic tapes (audio or
video). By the late 1990s, CDs became the standard
technology for music distribution. Now, digital video
disks DVD is the standard technology for movie
distribution. These changes led significant improvement
in the ability of consumers to make good copies from
other copies. At the same time, the Internet allows music
files to be transmitted between consumers without phys-
ical contact. Increased bandwidth and decreasing cost
Fig. 5. Profit as a function of initial price for different copying and risk
costs CFC, STPRM, At = $3600, O = $4800, and N = 4.
735
Fig. 6. Combined impact of the consumer connectivity and technology
on profit STPRM, At = $3600, O = $4800 Ri = 6, and d = $2.
will soon allow the same for transmission of movies.
Therefore, a consumer can have a neighbor provid-
ing a product for piracy who is located in a different
geographical region. Fig. 6 shows the significant
combined effect of consumer connectivity and repro-
duction technology on profit. Earlier technology is rep-
resented by the CFO and N = 1 whereas modern
technology is represented by CFC and N = 16. At high
initial prices, such as 10% above the mean reservation
price (i.e. $16.50), the decrease in profit due to
improved consumer connectivity and reproduction
technology is $44,949 (51%). Even for an initial price
equal to the average reservation price (i.e. $15), the
decrease in profit is $25,966 (12%).
5.7. Piracy and consumer welfare
From a social welfare perspective, it is optimal to
allocate products to all consumers with positive utilities.
Assuming the seller uses a profit-maximizing price,
Fig. 7 shows the number of consumers with a copy of
the product, legitimate or pirated, as a function of the
initial price. As the figure shows, piracy mitigates the
effect of the monopolist's pricing on product diffusion.
As the monopolist raises the initial price in an attempt to
skim the market, consumers respond by pirating the
product rather than waiting until the selling price drops
Fig. 7. Piracy and product diffusion STPRM, At = $3600, O = $4800
Ri = 6, and d = $1.
736 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
to or below their reservation prices. It is noteworthy that
the total number of consumers who obtain the product
remained stable at about 10,000 over all initial prices in
the range of $8$18. This switch of many consumers to
piracy has empirical support in the literature. Peitz and
Waelbroeck [24] used the data from the International
Federation of the Phonographic Industry (IFPI) World
Report of 2003 to investigate the legitimacy of the
RIAA's claim that music downloads are causing a large
decrease in music sales. Analysis of the data shows that
music downloading alone could have caused as high as a
20% reduction in music sales worldwide between 1998
and 2002. This effect does not include the effects of CD
burning and organized piracy which may account for
another significant amount of lost sales.
5.8. Piracy and decrease of royalty for the creator
Creators of reproducible goods, such as music
writers, singers, and actors, are frequently different
from the monopolist selling the product. Creators usu-
ally receive royalty for each legitimate product sold.
This royalty can be a fixed amount per unit sold or a
percentage of the price. Incorporating this royalty as a
fixed amount per unit sold does not change the reward
structure of the monopolist, whereas having it as a
percentage of the selling price may change the reward
structure. If the monopolist acts based on the STPRM
and $3 of royalty is paid to the creator per legitimate
product sold, then the total royalty paid to the creator is
shown in Fig. 8. As the figure shows, the creator's
royalty suffers only a small decrease because of a high
initial price when there is only one neighbor and copies
can be made only from legitimate products. Again, this
was the scenario creators had before digitization, the
Internet, and compression technologies. The decline in
royalty due a high initial price (i.e. a skimming strategy)
is much more significant for high consumer connectivity
(N = 16) and improved copying technology (CFC).
Fig. 8. Piracy and creator's royalty STPRM, At = $3600, O = $4800
Ri = 6, and d = $1.
The results from the system are robust over repeated
runs in the sense that the best pricing strategy for each
problem (i.e. parameter combination) and the learned
(i.e. most frequently used) pricing strategy were the same
for over 90% of the problems. In other words, the same
profit-maximizing behavior seems to be learned by the
seller for most problems. In addition, in an experiment
where a new consumer population was generated for
each run of a problem, the seller's pricing behavior in
terms of the number of price drops remained the same as
in the single consumer population runs. The exact prices
and profit amounts were different due to the randomness
of each newly generated consumer population.
The choice of the initial weight to assign to each state/
action pair and penalty scheme may have an impact on
how quickly the simulation converges to the best pricing
policy. However, its impact on the resulting best pricing
policy and best profit identified by the simulation should
be negligible. We experimented with different initial
weights and penalties and found the results to be robust.
For example, for problems with CFO, LTPDRM and 1
neighbor, initial weights of 0.005 and a penalty of 15%
resulted in best profits within 0.1% of the profits
obtained with initial weights of 0.001 and penalty of
10% for 160 out of the 168 problem instances.
The developed system can incorporate additional real
world aspects such as 1) declining interest in the prod-
uct over time, which can be incorporated as a down-
ward trend in the average reservation price over time,
2) effects of Internet technology, which can be modeled
as random connections between consumers in the
system, 3) effects of legal and education campaigns to
deter piracy, which can be modeled as decreases in
consumers' probability to pirate, and 4) the effects of
injecting some bad copies in the market to discourage
piracy, which some firms have used to deter piracy.
Furthermore, we assumed that consumers considers pi-
racy only if their reservation prices are not met. The
system can deal with other possibilities such as a
consumer deciding whether to pirate or purchase the
product based on the expected gain, or try to pirate first
and only purchase if unable to pirate, or can use a mix of
these and other rules. However, this will lead to different
results in terms of the experiments. In short, the pro-
posed system is flexible enough to handle many aspects
of the problem that would have been difficult to in-
corporate using different problem solving approaches.
6. Conclusion and suggestions for future research
Experiments indicate that CAS and ABM are useful
tools for firms in pricing products under piracy. The
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
system can be used to identify the best pricing policy in
terms of the best initial price and subsequent price
changes. Numerical experiments suggest that under
moderate to strong piracy, which is characterized by
high consumer connectivity and ability to make copies
from copies, the skimming strategy becomes unprofi-
table and it is better to have a single price. In addition,
discouraging piracy by taxing the copying medium and
equipment and by increasing deterrent control may not
work well. Specifically, the results suggest that for this
kind of control to work, consumers' perception of the
probability of being caught and the size of the penalty
they will incur must substantially increase.
Interestingly, piracy causes the number of products,
legitimate or pirated, in the market to be relatively
independent of the monopolist's pricing policy. If the
monopolist raises prices, consumers respond by more
piracy. In this respect, piracy erodes the power monopo-
lists have had in some industries. The ultimate victim of
piracy may be the creator of the information good who
gets a fixed dollar amount per legitimate product sold in
royalty. Therefore, many consumers thinking that piracy
is a victimless crime may be mistaken, especially for
products like music CDs.
The proposed system has several limitations. The
product modeled in this system does not lose value since
the time of its release. This implies that the product does
not undergo deterioration and is not subject to obso-
lescence. An inventoried item subject to obsolescence
incurs little or no physical damage until moment of
obsolescence, whereas an inventoried item subject to
deterioration will degrade overtime, thereby reducing its
market value [15]. Furthermore, learning on the part of
consumers is not incorporated into the system. Some
consumers, after observing pricing patterns of products,
may be willing to wait for one or more price reductions
before purchasing a product.
CAS methodology provides many opportunities for
further analysis of pricing under piracy. Several ex-
tensions of our model are planned including 1) allowing
agents to move in the system (such movement of con-
sumers is common and it may lead to further diffusion
of piracy), 2) incorporating consumers' declining
interest in the product over time. For many information
goods, life cycles are short and products compete with
many others for limited consumer disposable income;
consumers' declining interest in the product can be
modeled as a stochastic downward trend in reservation
prices over time. Such a decrease in the consumer
interest can be incorporated in the simulation using new
reservation prices given by ri,t = iri,t 1 every period,
where i is generated from a uniform distribution on
737
[a1, a2]. For example, a range of [.95,1] implies that the
reservation prices decrease on average by 2.5% every
period, and 3) examining global piracy and its
implications. Under global piracy there are many
relatively homogenous agents within regions and
heterogeneous agents between regions in terms of
disposable income and cultural dimensions which
influences piracy. Furthermore, there are considerable
variations in the environments of different regions in
terms of the existence and the degree of enforcement of
piracy control laws. Varying technology and quality
standards between regions further complicates the
problem. Because of the complexity arising from all
of these factors, CAS may be a good approach to un-
derstanding global piracy, which in turn will enable
better decision making by policy makers.
For the proposed model to be used in industry, mea-
sures of the parameters must be obtained. Some parameter
estimates such as the one for connectedness may be
estimated based on available data. Internet access statistics
may give a good idea of how connected consumers in a
particular region are. For example, according to Internet
World Statistics [16], 68.1% of Americans are Internet
users. Other data such as assessment of consumer risk cost
may require market research.
In developing CAS for pricing, several issues were
found to be key to successfully applying this method-
ology to business problems. One important issue is
designing the reward/reinforcement methods for firms.
The key questions here include: 1) how should different
actions be rewarded. Some actions may optimize short
term performance, but significantly sub-optimize long-
term performance, 2) how should the reward/reinforce-
ment methods balance the objectives of having emer-
gence to the best actions while at the same time not
reinforcing actions quickly causing other good actions
to be eliminated prematurely. For example, suppose two
actions (A and B) out of several actions for the same
state have the best long-term profits with action B
having larger profit. If action A is selected more fre-
quently in the beginning of the simulation than action B
due to chance, then its future chances of being selected
may increase very quickly relative to action B and may
therefore emerge as the best action for that state. An-
other important issue is the representation of consumer
agents. The key questions here are 1) is there a gener-
al approach for representing consumers which can be
used in different applications, and 2) how do consum-
ers learn from each other, market leaders, and other
sources, and 3) how to incorporate consumers' memory
into the system and how does that memory effect their
behavior?
738 M. Khouja et al. / Decision Support Systems 44 (2008) 725739
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Dr. Moutaz Khouja is a Professor of Operations
Management in the Belk College of Business
Administration at the University of North
Carolina at Charlotte. He received his PhD in
Operations Management from Kent State Uni-
versity. His publications have appeared in many
leading journals including Decision Sciences,
IIE Transactions, European Journal of Opera-
tional Research, International Journal of Pro-
duction Research, International Journal of
Production Economics, Journal of the Opera-
tional Research Society, and OMEGA.
 M. Khouja et al. / Decision Support Systems 44 (2008) 725739 739

Dr. Mirsad Hadzikadic joined the UNC
Charlotte faculty in 1987 after receiving his
Ph.D. in Computer Science from Southern
Methodist University where he was a Fulb-
right Scholar. In addition to publishing his
scholarship, he has made presentations at
national and international conferences, lead-
ing information technology firms, and uni-
versities. His research/scholarship activities
have been primarily focused on three areas:
data mining, cognitive science, and medical
informatics. From 1991 to 1997, he served as
the Director of the Department of Medical Informatics and Department
of Orthopedic Informatics of the Carolinas HealthCare System. In
1998, he joined Deloitte and Touche Consulting Group as Manager in
the Health Systems Integration Service Line. He returned full time to
the University in January 1999 to assume the chair position in
Computer Science and serve as Director of the Software Solutions Lab.
Currently, he is serving as the Dean of the College of Computing and
Informatics.
Dr. Li-Shiang Tsay earned her M.S. and Ph.
D. degrees in Computer Science and Informa-
tion Technology from the University of North
Carolina at Charlotte in 2003 and 2005,
respectively. Her research has been published
in journals and books including Foundations
of Data Mining, Data Mining: Foundations
and Practice, Encyclopedia of Data Ware-
housing and Mining, and Journal of Experi-
mental and Theoretical Artificial Intelligence.
Her research has also been presented at
international conferences including IEEE GrC, IEEE ICDM Work-
shop, IEEE/WIC/ACM, IIS, SPIE, and ISMIS. She has served and is
serving on several Program Committees of international conferences,
including ISMIS'06, IRMA'07, and RSEISP'07. She is an Assistant
Professor of Computer Science at Hampton University since January
2006.

Dr. Hari K. Rajagopalan earned his PhD in

Information Technology from the University
of North Carolina at Charlotte in 2006. Apart
from his PhD he also has an MBA in Finance
and an MS in Computer Science. His research
interests include locating emergency response
systems, pricing of digital products and
obsolescence in the high technology industry.
His research has published in the European
Journal of Operational Research, Computers
and Operations Research and other journals.
He is also an active participant at INFORMS, Decision Sciences and
European Working Group in Transportation Meeting and Mini EURO
Conferences. He is currently the Assistant Professor in Management at
Francis Marion University.