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 with a Prior on Market Response

Abstract: We study a problem of dynamic pricing faced by a vendor with limited inventory, uncertain about demand, and aiming to maximize expected discounted revenue over an infinite time horizon. The vendor learns from purchase data, so his strategy must take into account the impact of price on both revenue and future observations. We focus on a model in which customers arrive according to a Poisson process of uncertain rate, each with an independent, identically distributed reservation price. Upon arrival, a customer purchases a unit of inventory if and only if his reservation price equals or exceeds the vendor's prevailing price. We propose a simple heuristic approach to pricing in this context, which we refer to as decay balancing. Computational results demonstrate that decay balancing offers significant revenue gains over recently studied certainty equivalent and greedy heuristics. We also establish that changes in inventory and uncertainty in the arrival rate bear appropriate directional impacts on decay balancing prices in contrast to these alternatives, and we derive worst-case bounds on performance loss. We extend the three aforementioned heuristics to address a model involving multiple customer segments and stores, and provide experimental results demonstrating similar relative merits in this context.

Dynamic Pricing of Electricity

Abstract: As both a regulator and an academic, Fred Kahn argued that end-use electricity consumers should face prices that reflect the time-varying marginal costs of generating electricity. This has been very slow to happen in the US, even in light of recent technological advances that have lowered costs and improved functionality for meters and automated demand response technologies. We describe these recent developments and discuss the remaining barriers to the proliferation of time-varying electricity pricing.

Inter-firm rivalry and firm-specific price elasticities in deregulated airline markets.

Abstract: Since deregulation in 1978 the US airline industry has undergone major structural changes. A series of mergers and hub-and-spoke network development have increased market concentration at major airports as well as at industry level. The industry is still being consolidated. Analysts express concern regarding the increasing market power of a few airlines, especially in route markets connected to major hub airports. There is clear evidence that major US airlines attempt to solidify their market power by intensif ying hub and-spoke networks, offering commission overrides to travel agents (a system that rewards agents for directing a high proportion of their business to an airline), using skilful dynamic pricing and seat allocation techniques (scientific yield management) and frequent-flyer bonus programmes for rewarding brand-loyal customers. A large number of routes are served by three or fewer airlines, indicating that a small numbers oligopoly is the dominant market structure in the industry, particularly on the routes directly connected to major hubs. Furthermore, recent evidence shows that dominant airlines at hub airports have sustained higher average fares for the local traffic than their competitors (see Borenstein,1989, 1990; and Berry, 1992). This suggests the importance of understanding competitive interaction among airlines in order to explain their pricing behaviour and price differentials between airlines serving the same route markets.

Dynamic Resource Pricing on Federated Clouds

Abstract: Current large distributed systems allow users to share and trade resources. In cloud computing, users purchase different types of resources from one or more resource providers using a fixed pricing scheme. Federated clouds, a topic of recent interest, allows different cloud providers to share resources for increased scalability and reliability. However, users and providers of cloud resources are rational and maximize their own interest when consuming and contributing shared resources. In this paper, we present a dyanmic pricing scheme suitable for rational users requests containing multiple resource types. Using simulations, we compare the efficiency of our proposed strategy-proof dynamic scheme with fixed pricing, and show that user welfare and the percentage of successful requests is increased by using dynamic pricing.