Dynamic pricing problems with elastic demand

S. Marban; G.R.J. van der Zwaan; A. Grigoriev; B. Hiller; T. Vredeveld

doi:10.1016/j.orl.2012.01.005

Dynamic pricing problems with elastic demand

S. Marban, G.R.J. van der Zwaan, A. Grigoriev, B. Hiller, T. Vredeveld^*

^*Corresponding author for this work

Quantitative Economics

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We consider a dynamic pricing problem for a company that sells a single product to a group of price-sensitive customers over a finite time horizon. The objective is to set the prices over time so as to maximize revenue. Two price-sensitivity models are studied: multiplicative and additive demand change. We develop a polynomial-time algorithm for the multiplicative model. In contrast, we prove that the problem under additive demand change is NP-hard and admits an FPTAS.

Original language	English
Pages (from-to)	175-179
Number of pages	5
Journal	Operations Research Letters
Volume	40
Issue number	3
DOIs	https://doi.org/10.1016/j.orl.2012.01.005
Publication status	Published - May 2012

Keywords

Dynamic pricing
Elastic demand
Revenue optimization
Computational complexity
Approximation scheme
STRATEGIES

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10.1016/j.orl.2012.01.005

Cite this

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title = "Dynamic pricing problems with elastic demand",

abstract = "We consider a dynamic pricing problem for a company that sells a single product to a group of price-sensitive customers over a finite time horizon. The objective is to set the prices over time so as to maximize revenue. Two price-sensitivity models are studied: multiplicative and additive demand change. We develop a polynomial-time algorithm for the multiplicative model. In contrast, we prove that the problem under additive demand change is NP-hard and admits an FPTAS. ",

keywords = "Dynamic pricing, Elastic demand, Revenue optimization, Computational complexity, Approximation scheme, STRATEGIES",

author = "S. Marban and {van der Zwaan}, G.R.J. and A. Grigoriev and B. Hiller and T. Vredeveld",

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AU - Marban, S.

AU - van der Zwaan, G.R.J.

AU - Grigoriev, A.

AU - Hiller, B.

AU - Vredeveld, T.

PY - 2012/5

Y1 - 2012/5

N2 - We consider a dynamic pricing problem for a company that sells a single product to a group of price-sensitive customers over a finite time horizon. The objective is to set the prices over time so as to maximize revenue. Two price-sensitivity models are studied: multiplicative and additive demand change. We develop a polynomial-time algorithm for the multiplicative model. In contrast, we prove that the problem under additive demand change is NP-hard and admits an FPTAS.

AB - We consider a dynamic pricing problem for a company that sells a single product to a group of price-sensitive customers over a finite time horizon. The objective is to set the prices over time so as to maximize revenue. Two price-sensitivity models are studied: multiplicative and additive demand change. We develop a polynomial-time algorithm for the multiplicative model. In contrast, we prove that the problem under additive demand change is NP-hard and admits an FPTAS.

KW - Dynamic pricing

KW - Elastic demand

KW - Revenue optimization

KW - Computational complexity

KW - Approximation scheme

KW - STRATEGIES

U2 - 10.1016/j.orl.2012.01.005

DO - 10.1016/j.orl.2012.01.005

M3 - Article

SN - 0167-6377

VL - 40

SP - 175

EP - 179

JO - Operations Research Letters

JF - Operations Research Letters

IS - 3

ER -

Dynamic pricing problems with elastic demand

Abstract

Keywords

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