Dynamic Pricing with a Prior on Market Response
We study a problem of dynamic pricing faced by a vendor with limited inventory, uncertain about demand, aiming to maximize expected discounted revenue over an infinite time horizon. The vendor learns from purchase data, so his strategy must take into account the impact of price on both revenue an...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
Institute for Operations Research and the Management Sciences
2011
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| Online Access: | http://hdl.handle.net/1721.1/64802 https://orcid.org/0000-0002-5856-9246 |
| Summary: | We study a problem of dynamic pricing faced by a vendor with limited inventory, uncertain
about demand, aiming to maximize expected discounted revenue over an infinite time horizon.
The vendor learns from purchase data, so his strategy must take into account the impact of
price on both revenue and future observations. We focus on a model in which customers arrive
according to a Poisson process of uncertain rate, each with an independent, identically
distributed reservation price. Upon arrival, a customer purchases a unit of inventory if and only if his reservation price equals or exceeds the vendor’s prevailing price. |
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