Simple Policies for Dynamic Pricing with Imperfect Forecasts
We consider the “classical” single-product dynamic pricing problem allowing the “scale” of demand intensity to be modulated by an exogenous “market size” stochastic process. This is a natural model of dynamically changing market conditions. We show that for a broad family of Gaussian market-size pro...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Institute for Operations Research and the Management Sciences (INFORMS)
2014
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| Online Access: | http://hdl.handle.net/1721.1/87676 https://orcid.org/0000-0002-5856-9246 |
| _version_ | 1826193413447352320 |
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| author | Chen, Yiwei Farias, Vivek F. |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Chen, Yiwei Farias, Vivek F. |
| author_sort | Chen, Yiwei |
| collection | MIT |
| description | We consider the “classical” single-product dynamic pricing problem allowing the “scale” of demand intensity to be modulated by an exogenous “market size” stochastic process. This is a natural model of dynamically changing market conditions. We show that for a broad family of Gaussian market-size processes, simple dynamic pricing rules that are essentially agnostic to the specification of this market-size process perform provably well. The pricing policies we develop are shown to compensate for forecast imperfections (or a lack of forecast information altogether) by frequent reoptimization and reestimation of the “instantaneous” market size. |
| first_indexed | 2024-09-23T09:38:52Z |
| format | Article |
| id | mit-1721.1/87676 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T09:38:52Z |
| publishDate | 2014 |
| publisher | Institute for Operations Research and the Management Sciences (INFORMS) |
| record_format | dspace |
| spelling | mit-1721.1/876762022-09-30T15:55:18Z Simple Policies for Dynamic Pricing with Imperfect Forecasts Chen, Yiwei Farias, Vivek F. Sloan School of Management Farias, Vivek F. We consider the “classical” single-product dynamic pricing problem allowing the “scale” of demand intensity to be modulated by an exogenous “market size” stochastic process. This is a natural model of dynamically changing market conditions. We show that for a broad family of Gaussian market-size processes, simple dynamic pricing rules that are essentially agnostic to the specification of this market-size process perform provably well. The pricing policies we develop are shown to compensate for forecast imperfections (or a lack of forecast information altogether) by frequent reoptimization and reestimation of the “instantaneous” market size. 2014-06-06T14:50:20Z 2014-06-06T14:50:20Z 2013-06 2010-03 Article http://purl.org/eprint/type/JournalArticle 0030-364X 1526-5463 http://hdl.handle.net/1721.1/87676 Chen, Yiwei, and Vivek F. Farias. “Simple Policies for Dynamic Pricing with Imperfect Forecasts.” Operations Research 61, no. 3 (June 2013): 612–624. https://orcid.org/0000-0002-5856-9246 en_US http://dx.doi.org/10.1287/opre.2013.1166 Operations Research Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Institute for Operations Research and the Management Sciences (INFORMS) MIT web domain |
| spellingShingle | Chen, Yiwei Farias, Vivek F. Simple Policies for Dynamic Pricing with Imperfect Forecasts |
| title | Simple Policies for Dynamic Pricing with Imperfect Forecasts |
| title_full | Simple Policies for Dynamic Pricing with Imperfect Forecasts |
| title_fullStr | Simple Policies for Dynamic Pricing with Imperfect Forecasts |
| title_full_unstemmed | Simple Policies for Dynamic Pricing with Imperfect Forecasts |
| title_short | Simple Policies for Dynamic Pricing with Imperfect Forecasts |
| title_sort | simple policies for dynamic pricing with imperfect forecasts |
| url | http://hdl.handle.net/1721.1/87676 https://orcid.org/0000-0002-5856-9246 |
| work_keys_str_mv | AT chenyiwei simplepoliciesfordynamicpricingwithimperfectforecasts AT fariasvivekf simplepoliciesfordynamicpricingwithimperfectforecasts |