Dynamic pricing problems with elastic demand

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

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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 languageEnglish
Pages (from-to)175-179
Number of pages5
JournalOperations Research Letters
Volume40
Issue number3
DOIs
Publication statusPublished - May 2012

Keywords

  • Dynamic pricing
  • Elastic demand
  • Revenue optimization
  • Computational complexity
  • Approximation scheme
  • STRATEGIES

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