A sequential dynamic pricing model and its applications. (English) Zbl 1075.91015
Summary: Consider a sequential dynamic pricing model where a seller sells a given stock to a random number of customers. Arriving one at a time, each customer will purchase one item if the product price is lower than her personal reservation price. The seller’s objective is to post a potentially different price for each customer in order to maximize the expected total revenue. We formulate the seller’s problem as a stochastic dynamic programming model, and develop an algorithm to compute the optimal policy. We then apply the results from this sequential dynamic pricing model to the case where customers arrive according to a continuous-time point process. In particular, we derive tight bounds for the optimal expected revenue, and develop an asymptotically optimal heuristic policy.
MSC:
| 91B24 | Microeconomic theory (price theory and economic markets) |
| 90B05 | Inventory, storage, reservoirs |
| 90C39 | Dynamic programming |
| 91B70 | Stochastic models in economics |
Keywords:
dynamic pricing; inventory control; stochastic dynamic programming; asymptotically optimal policyReferences:
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