Price and Profit Optimization for Financial Services
AbstractProspective 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. View Full-Text
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Bolancé, C.; Guillen, M.; Nielsen, J.P.; Thuring, F. Price and Profit Optimization for Financial Services. Risks 2018, 6, 9.
Bolancé C, Guillen M, Nielsen JP, Thuring F. Price and Profit Optimization for Financial Services. Risks. 2018; 6(1):9.Chicago/Turabian Style
Bolancé, Catalina; Guillen, Montserrat; Nielsen, Jens P.; Thuring, Fredrik. 2018. "Price and Profit Optimization for Financial Services." Risks 6, no. 1: 9.
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