Dynamic pricing with continuous stochastic demand

Author

Wang, Yongqiang ; Fuy, Michael C. ; Marcus, Steven I.

Author_Institution

Dept. of Electr. & Comput. Eng., Univ. of Maryland, College Park, PA, USA

fYear

2009

fDate

15-18 Dec. 2009

Firstpage

8531

Lastpage

8536

Abstract

We analyze the problem of dynamic pricing for inventory systems with price-sensitive demand, which is assumed to follow a continuous-time, continuous-state stochastic process. An analytical solution for a special case of the demand is provided. We propose a simulation-based method for solving the pricing problem under a broad range of demand models, assuming a finite number of price changes over the time horizon of interest. We derive unbiased gradient estimators of the profit function with respect to the pricing parameters.

Keywords

gradient methods; pricing; stochastic processes; continuous-state stochastic process; continuous-time stochastic process; dynamic pricing; inventory systems; price-sensitive demand; profit function; unbiased gradient estimators; Costs; Diffusion processes; Educational institutions; Equations; Inventory management; Pricing; Shape; Stochastic processes; Stochastic systems; Uncertainty; Dynamic Pricing; Gradient Estimation; Inventory; Stochastic Control;

fLanguage

English

Publisher

ieee

Conference_Titel

Decision and Control, 2009 held jointly with the 2009 28th Chinese Control Conference. CDC/CCC 2009. Proceedings of the 48th IEEE Conference on

Conference_Location

Shanghai

ISSN

0191-2216

Print_ISBN

978-1-4244-3871-6

Electronic_ISBN

0191-2216

Type

conf

DOI

10.1109/CDC.2009.5400890

Filename

5400890