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 language | English |
|---|---|
| Pages (from-to) | 289-306 |
| Number of pages | 18 |
| Journal | Probability in the Engineering and Informational Sciences |
| Volume | 25 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 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
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