A Primal–Dual Learning Algorithm for Personalized Dynamic Pricing with an Inventory Constraint

DOI10.1287/MOOR.2021.1220MaRDI QIDQ5870348zbMATH OpenOpenAlexFDO

Authors Ningyuan Chen, Guillermo Gallego

Publication date 9 January 2023

Published in Mathematics of Operations Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1812.09234

zbMATH Keywords

multi-armed banditdynamic pricingnetwork revenue managementonline retailinglearning and earning

Mathematics Subject Classification ID

Dynamic programming (90C39) Inventory, storage, reservoirs (90B05) Microeconomic theory (price theory and economic markets) (91B24)

Abstract: We consider the problem of a firm seeking to use personalized pricing to sell an exogenously given stock of a product over a finite selling horizon to different consumer types. We assume that the type of an arriving consumer can be observed but the demand function associated with each type is initially unknown. The firm sets personalized prices dynamically for each type and attempts to maximize the revenue over the season. We provide a learning algorithm that is near-optimal when the demand and capacity scale in proportion. The algorithm utilizes the primal-dual formulation of the problem and learns the dual optimal solution explicitly. It allows the algorithm to overcome the curse of dimensionality (the rate of regret is independent of the number of types) and sheds light on novel algorithmic designs for learning problems with resource constraints.

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Cited in

(5)

• SOLO FTRL algorithm for production management with transfer prices
• Nonparametric pricing analytics with customer covariates
• Differential Privacy in Personalized Pricing with Nonparametric Demand Models
• Personalized dynamic pricing of limited inventories
• Joint dynamic pricing and marketing-mix strategies for revenue management applications with stochastic demand

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