Dynamic Pricing under a Static Calendar

Wednesday, October 31, 2018 - 3:00pm to 4:00pm

Event Calendar Category

LIDS & Stats Tea

Speaker Name

Jinglong Zhao

Affiliation

IDSS

Building and Room Number

LIDS Lounge

Abstract

Our work is based on the classical dynamic pricing problem. From our collaborations with a large Consumer Packaged Goods company, we have found that while they appreciate the advantages of dynamic pricing, it is operationally beneficial for them to plan out a deterministic price calendar in advance. Motivated by this, we formulate the dynamic pricing problem under static calendar constraints, where instead of doing closed-loop control, we are now doing open-loop control. We study how classical dynamic pricing intuitions may hold, or fail. We distinguish two cases: stationary and non-stationary arrivals. Then we propose two constant-factor approximation heuristics, and their corresponding asymptotic optimality analyses, under both cases. The bounds we obtain are tight, and they match the bounds of classical dynamic pricing model. Finally, we generalize our model in two different ways. First, the customer purchase can be not only Bernoulli random variables, but also arbitrary random variables with bounded support. Second, instead of offering different prices, we can offer an assortment of products, and customer chooses one of them. Under both generalizations, our heuristics still work, by giving us the exact same bounds.

Biography

Jinglong Zhao is a third-year Ph.D. student from the Social & Engineering Systems program in the Institute of Data, Systems, and Society at MIT, where he is being advised by Prof. David Simchi-Levi. Jinglong’s research interests are in combinatorial optimization with applications in dynamic pricing and revenue management and supply chain management.