Stochastic optimization for dynamic pricing

DOI10.1007/978-3-030-92711-0_6MaRDI QIDQ5054161zbMATH OpenOpenAlexFDO

Authors Dmitry Pasechnyuk, Pavel Dvurechensky, Sergey Omelchenko, Alexander V. Gasnikov

Publication date 29 November 2022

Published in Communications in Computer and Information Science (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2106.14090

zbMATH Keywords

automatic pricingexpected revenue functionstochastic convex optimizationsupply and demand balancing

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24) Optimal stochastic control (93E20)

Abstract: We consider the problem of supply and demand balancing that is stated as a minimization problem for the total expected revenue function describing the behavior of both consumers and suppliers. In the considered market model we assume that consumers follow the discrete choice demand model, while suppliers are equipped with some quantity adjustment costs. The resulting optimization problem is smooth and convex making it amenable for application of efficient optimization algorithms with the aim of automatically setting prices for online marketplaces. We propose to use stochastic gradient methods to solve the above problem. We interpret the stochastic oracle as a response to the behavior of a random market participant, consumer or supplier. This allows us to interpret the considered algorithms and describe a suitable behavior of consumers and suppliers that leads to fast convergence to the equilibrium in a close to the real marketplace environment.

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Cites work

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Cited in

(8)

• Stochastic optimization on social networks with application to service pricing
• Dynamic pricing with stochastic reference price effect
• Price of correlations in stochastic optimization
• Dynamic Pricing with Neural Network Demand Models and Evolutionary Algorithms
• Dynamic pricing under nested logit demand
• Bayesian strategies for dynamic pricing in e‐commerce
• Risk-averse dynamic pricing using mean-semivariance optimization
• SOLO FTRL algorithm for production management with transfer prices

Describes a project that uses

Uses Software

• AdaGrad

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