Dynamic pricing

About: Dynamic pricing is a research topic. Over the lifetime, 4144 publications have been published within this topic receiving 91390 citations. The topic is also known as: surge pricing & demand pricing.

Dynamic pricing of substitutable products with limited inventories under logit demand

Abstract: This article considers the dynamic pricing of two substitutable products over a predetermined, finite selling season. The initial inventory levels of the products are fixed exogenously and there are no replenishment opportunities during the season. It is assumed that each arriving customer chooses from available products based on the multinomial logit choice model, which captures the effect of prices on consumer choice. Every time a product runs out of stock, the set of choices shrinks, capturing the effect of stockouts on consumer choice. It is shown that, under the optimal pricing policy, the marginal value of an item is increasing in the remaining time and decreasing in its own stock level and the other product's stock level. Despite such non-surprising behavior on the part of marginal values, the optimal price itself is not simply monotonic in the remaining time or the other product's stock level. For example, a product's optimal price may increase if the remaining time decreases or if the total inven...

Dynamic Pricing and Inventory Management Under Inventory-Dependent Demand

Abstract: We analyze a finite horizon periodic review joint pricing and inventory management model for a firm that replenishes and sells a product under the scarcity effect of inventory. The demand distribution in each period depends negatively on the sales price and customer-accessible inventory level at the beginning of the period. The firm can withhold or dispose of its on-hand inventory to deal with the scarcity effect. We show that a customer-accessible-inventory-dependent order-up-to/dispose-down-to/display-up-to list-price policy is optimal. Moreover, the optimal order-up-to/display-up-to and list-price levels are decreasing in the customer-accessible inventory level. When the scarcity effect of inventory is sufficiently strong, the firm should display no positive inventory and deliberately make every customer wait. The analysis of two important special cases wherein the firm cannot withhold or dispose of inventory delivers sharper insights showing that the inventory-dependent demand drives both optimal prices and order-up-to levels down. In addition, we demonstrate that an increase in the operational flexibility e.g., a higher salvage value or the inventory withholding opportunity mitigates the demand loss caused by high excess inventory and increases the optimal order-up-to levels and sales prices. We also generalize our model by incorporating responsive inventory reallocation after demand realizes. Finally, we perform extensive numerical studies to demonstrate that both the profit loss of ignoring the scarcity effect and the value of dynamic pricing under the scarcity effect are significant.

Incentive mechanisms for peer-to-peer systems

Abstract: Most of the existing research in peer-to-peer systems focuses on protocol design and doesn’t consider the rationality of each peer. One phenomenon that should not be ignored is free riding. Some peers simply consume system resources but contribute nothing to the system. In this paper we present an agent-based peer-to-peer system, in which each peer is a software agent and the agents cooperate to search the whole system through referrals. We present a static and a dynamic pricing mechanism to motivate each agent to behave rationally while still achieving good overall system performance. We study the behavior of the agents under two pricing mechanisms and evaluate the impact of free riding using simulations.