The infinite time horizon dynamic pricing problem with multi-unit demand |
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Authors: | Cheng Wang Wansheng Tang Ruiqing Zhao |
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Affiliation: | 1. Institute of Systems Engineering, Tianjin University, Tianjin, 300072, China 2. Institute of Industrial Engineering, Zhejiang University of Technology, Hangzhou, 310014, China
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Abstract: | This paper studies a dynamic pricing problem for a monopolist selling multiple identical items to potential buyers arriving over time, where the time horizon is infinite, the goods are imperishable and the buyers’ arrival follows a renewal process. Each potential buyer has some private information about his purchasing will, and this private information is unknown to the seller and therefore characterized as a random variable in this paper. Thus, the buyers may have multi-unit demand. Meanwhile, the seller needs to determine the optimal posted price such that his expected discounted revenue is maximized. This problem is formulated as a stochastic dynamic programming in this paper and then how to obtain the solution is explored. A numerical study shows that the optimal posted price performs better than that of optimal fixed price, and this advantage becomes obvious as the interest rate and/or the number of initial items increases. |
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