Pricing perishable products with compound poisson demands

Pengfei Guo, Zhaotong Lian, Yulan Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

4 Citations (Scopus)

Abstract

We consider the dynamic pricing problem of perishable products in a system with a constant production rate. Potential demands arrive according to a compound Poisson process, and are price-sensitive. We carry out the sample path analysis of the inventory process and by using level-crossing method, we derive its stationary distribution given a pricing function. Based on the distribution, we express the average profit function. By a stochastic comparison approach, we characterize the pricing strategy given different customers willingness-to-pay functions. Finally, we provide an approximation algorithm to calculate the optimal pricing function.
Original languageEnglish
Pages (from-to)289-306
Number of pages18
JournalProbability in the Engineering and Informational Sciences
Volume25
Issue number3
DOIs
Publication statusPublished - 1 Jul 2011

Keywords

  • dynamic pricing
  • level-crossing
  • perishable inventory
  • revenue management

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Cite this