Performance bounds on optimal fixed prices |
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Authors: | Alper Şen |
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Affiliation: | Department of Industrial Engineering, Bilkent University, Bilkent, Ankara, 06800, Turkey |
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Abstract: | We consider the problem of selling a fixed stock of items over a finite horizon when the buyers arrive following a Poisson process. We obtain a general lower bound on the performance of using a fixed price rather than dynamically adjusting the price. The bound is 63.21% for one unit of inventory, and it improves as the inventory increases. For the one-unit case, we also obtain tight bounds: 89.85% for the constant-elasticity and 96.93% for the linear price-response functions. |
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Keywords: | Dynamic pricing Revenue management Yield management Heuristics |
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