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 fami...
Main Authors: | , |
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Other Authors: | |
Format: | Article |
Language: | English |
Published: |
Institute for Operations Research and the Management Sciences (INFORMS),
2014-06-06T14:50:20Z.
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Subjects: | |
Online Access: | Get fulltext |
Summary: | 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. |
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