Optimal dynamic pricing of inventories with stochastic demand and discounted criterion

Ping Cao, Jianbin Li, Hong Yan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

29 Citations (Scopus)


We consider a continuous time dynamic pricing problem for selling a given number of items over a finite or infinite time horizon. The demand is price sensitive and follows a non-homogeneous Poisson process. We formulate this problem as to maximize the expected discounted revenue and obtain the structural properties of the optimal revenue function and optimal price policy by the Hamilton-Jacobi-Bellman (HJB) equation. Moreover, we study the impact of the discount rate on the optimal revenue function and the optimal price. Further, we extend the problem to the case with discounting and time-varying demand, the infinite time horizon problem. Numerical examples are used to illustrate our analytical results.
Original languageEnglish
Pages (from-to)580-588
Number of pages9
JournalEuropean Journal of Operational Research
Issue number3
Publication statusPublished - 16 Mar 2012


  • Discounted criterion
  • HJB equation
  • Optimal pricing
  • Revenue management

ASJC Scopus subject areas

  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management


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