Showing papers on "Dynamic pricing published in 1979"

Stochastic Control of Competition Through Prices

Abstract: We assume that the price of a product set by a firm affects its immediate profit rate as well as the probabilistic rate of arrival of new firms into the industry. Therefore, the firm's optimal dynamic pricing strategy must balance the increased current profits from setting a high price against the expected dilution of future profits due to additional competition. We provide a continuous-time Markov decision model and characterize the structure of the optimal control strategy and its sensitivity to the problem parameters. We also indicate the relationship of our problem to the queue control literature.

Optimal periodic control strategies in a dynamic pricing problem

Abstract: This paper considers an application of control theory to management decision problems. The formulation of optimal periodic control is employed in studying the so-called intertemporal price discrimination problem. Previous static analyses of this problem have shown that the policy of switching between two certain price levels is more profitable than the optimal constant price. In the present paper the dynamics of the demand is modelled explicitly. Using this formulation the optimal dynamic solution to this problem can be found. A numerical example with three consumer groups is considered. The solution to this example shows that the optimal price patterns need not necessarily consist of only two price levels.