The infinite time horizon dynamic pricing problem with multi-unit demand (Q360489)

The problem under consideration is a dynamic and stochastic pricing problem arising before a monopolist sells good items to potential buyers arriving over time. Each buyer has intention to buy some (integer) quantity of the items, however, he/she really buys a quantity depending also on the price and on the number of items remaining in the stock. The buyers' intentions are independent and identically distributed random variables with a distribution known to the seller. The buyers are identical with respect to preferences which are represented by a unique neoclassic-type utility function depending on the purchasing quantity and on the intention variable as an individual parameter. A buyer's purchasing decision (demand) is defined, unlike the neoclassic individual demand theory, as a maximization of the difference between his/her utility function and expenditure under limitation of the purchasing quantity by the remaining number of items. The seller's optimization problem is a posted pricing such that his expected and discounted in time revenue is maximized. Formally, this problem is a dynamic stochastic and discrete programming. The main result is the deduction of Bellman equations that define the optimal pricing. A numerical example which demonstrates advantages of the posted pricing relatively to the optimal fixed pricing is presented.