A simulation-based algorithm for optimal pricing policy under demand uncertainty

作者：Chakravarty Saswata^*; Padakandla Sindhu; Bhatnagar Shalabh

来源：International Transactions in Operational Research, 2014, 21(5): 737-760.

DOI：10.1111/itor.12064

• optimal pricing policy
• Bass model
• parameterized stochastic differential equation (SDE)
• stochastic approximation algorithm
• smoothed functional gradient estimates

We propose a simulation-based algorithm for computing the optimal pricing policy for a product under uncertain demand dynamics. We consider a parameterized stochastic differential equation (SDE) model for the uncertain demand dynamics of the product over the planning horizon. In particular, we consider a dynamic model that is an extension of the Bass model. The performance of our algorithm is compared to that of a myopic pricing policy and is shown to give better results. Two significant advantages with our algorithm are as follows: (a) it does not require information on the system model parameters if the SDE system state is known via either a simulation device or real data, and (b) as it works efficiently even for high-dimensional parameters, it uses the efficient smoothed functional gradient estimator.

• 出版日期2014-9