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.

Customer response to day-ahead wholesale market electricity prices: Case study of RTP program experience in New York

Abstract: There is growing interest in policies, programs and tariffs that encourage customer loads to provide demand response (DR) to help discipline wholesale electricity markets Proposals at the retail level range from eliminating fixed rate tariffs as the default service for some or all customer groups to reinstituting utility-sponsored load management programs with market-based inducements to curtail Alternative rate designs include time-of-use (TOU), day-ahead real-time pricing (RTP), critical peak pricing, and even pricing usage at real-time market balancing prices Some Independent System Operators (ISOs) have implemented their own DR programs whereby load curtailment capabilities are treated as a system resource and are paid an equivalent value The resulting load reductions from these tariffs and programs provide a variety of benefits, including limiting the ability of suppliers to increase spot and long-term market-clearing prices above competitive levels (Neenan et al, 2002; Boren stein, 2002; Ruff, 2002) Unfortunately, there is little information in the public domain to characterize and quantify how customers actually respond to these alternative dynamic pricing schemes A few empirical studies of large customer RTP response have shown modest results for most customers, with a few very price-responsive customers providing most of the aggregate response (Herriges et al, 1993; Schwarz et al, 2002) However, these studies examined response to voluntary, two-part RTP programs implemented by utilities in states without retail competition1 Furthermore, the researchers had limited information on customer characteristics so they were unable to identify the drivers to price response In the absence of a compelling characterization of why customers join RTP programs and how they respond to prices, many initiatives to modernize retail electricity rates seem to be stymied

Dynamic Pricing with Financial Milestones: Feedback-Form Policies

Abstract: We study a seller that starts with an initial inventory of goods, has a target horizon over which to sell the goods, and is subject to a set of financial milestone constraints on the revenues and sales that need to be achieved at different time points along the sales horizon. We characterize the revenue maximizing dynamic pricing policy for the seller and highlight the effect of revenue and sales milestones on its structure. The optimal policy can be written in feedback form, where the price at each point in time is selected so as to track the most stringent among all future milestones. Building on that observation, we propose a discrete-review policy that aims to dynamically track the appropriate milestone constraint, and show that this simple and practical policy is near-optimal in settings with large initial capacity and long sales horizons even in settings with no advance demand model information. One motivating application comes from the sales of new multi-unit, residential real estate developments, where intermediate milestone constraints play an important role in their financing and construction.

Static and Dynamic Pricing of Excess Capacity in a Make-to-Order Environment

Abstract: We consider a make-to-order manufacturer that serves two customer classes: core customers who pay a fixed negotiated price, and “fill-in” customers who make submittal decisions based on the current price set by the firm. Using a Markovian queueing model, we determine how much the firm can gain by explicitly accounting for the status of its production facility in making pricing decisions. Specifically, we examine three pricing policies: (1) static, state-independent pricing, (2) constant pricing up to a cutoff state, and (3) general state-dependent pricing. We determine properties of each policy, and illustrate numerically the financial gains that the firm can achieve by following each policy as compared with simpler policies. Our main result is that constant pricing up to a cutoff state can dramatically outperform a state-independent policy, while at the same time achieving most of the increase in revenue achievable from general state-dependent pricing. Thus, we find that constant pricing up to a cutoff state presents an attractive tradeoff between ease of implementation and revenue gain. When the costs of policy design and implementation are taken into account, this simple heuristic may actually out-perform general state-dependent pricing in some settings.

Dynamic Trust Enforcing Pricing Scheme for Sensors-as-a-Service in Sensor-Cloud Infrastructure

Abstract: In this paper, the problem of provisioning high quality of Sensors-as-a-Service (Se-aaS) in the presence of competitive sensor-owners, i.e., oligopolistic market, and heterogeneous sensor nodes in service-oriented sensor-cloud is studied. Oligopolistic sensor-owners adopt unfair means to degrade the quality of service provided by other sensor-owners in the sensor-cloud market. In order to address this problem, a dynamic pricing scheme, named DETER, is proposed in this work to enforce trust among the sensor-owners for maintaining the quality of Se-aaS provided by the Sensor-Cloud Service Provider (SCSP). Each sensor node calculates distributed trust opinion for other nodes, while the SCSP calculates centralized trust opinion for each sensor-owner. A Single-Leader-Multiple-Follower Stackelberg Game is formulated in which the SCSP acts as the leader and decides price to be paid to each sensor-owner, while ensuring maximum profit. On the other hand, the sensor-owners act as the followers and decide their strategies for earning maximum profit. Thereby, using DETER, SCSP enforces high trust among the sensor-owners. Additionally, using DETER, energy consumption of sensor nodes in sensor-cloud decreases by 4.69-11.56 percent, and network overhead decreases by 52.6-56.53 percent. The trade-off between price earned by the sensor-owners and profit of the SCSP in service-oriented sensor-cloud is also maintained using DETER.

Optimal piecewise-constant price under heterogeneous sensitivity to product freshness

Abstract: When perishable products are priced uniformly, regardless of the amount of time remaining until expiration, consumers may gravitate towards fresher products, leaving some inventory unsold. This research considers dynamic pricing policies as well as replenishment policies in the context of perishable products with a fixed shelf life. Consumers are assumed to be heterogeneous in their sensitivity to freshness, i.e. their willingness to pay more for fresher products. We develop a model for identifying an optimal (profit-maximising) dynamic pricing policy and for evaluating the extent to which both the retailer and the consumer benefit from the implementation of a dynamic pricing policy as opposed to a static policy. The model assumes that the retailer is able to utilise knowledge regarding the heterogeneous characteristics of incoming customers (e.g. the retailer can gather specific information about customers’ historical purchases). Unexpectedly, it is proven that in an optimal pricing policy, the retailer ...