Dynamic pricing with finite price sets: a non-parametric approach

We study price optimization of perishable inventory over multiple, consecutive selling seasons in the presence of demand uncertainty. Each selling season consists of a finite number of discrete time periods, and demand per time period is Bernoulli distributed with price-dependent parameter. The set of feasible prices is finite, and the expected demand corresponding to each price is unknown to the seller, whose objective is to maximize cumulative expected revenue. We propose an algorithm that estimates the unknown parameters in a learning phase, and in each subsequent season applies a policy determined as the solution to a sample dynamic program, which modifies the underlying dynamic program by replacing the unknown parameters by the estimate. Revenue performance is measured by the regret: the expected revenue loss relative to the optimal attainable revenue under full information. For a given number of seasons n, we show that if the number of seasons allocated to learning is asymptotic to $$(n^2\log n)^{1/3}$$ ( n 2 log n ) 1 / 3 , then the regret is of the same order, uniformly over all unknown demand parameters. An extensive numerical study that compares our algorithm to six benchmarks adapted from the literature demonstrates the effectiveness of our approach.

Perishable Inventory System with N-Policy, MAP Arrivals, and Impatient Customers

In this study, we consider a perishable inventory system that has an (s, Q) ordering policy, along with a finite waiting hall. The single server, which provides an item to the customer after completing the required service performance for that item, only begins serving after N customers have arrived. Impatient demand is assumed in that the customers waiting to be served lose patience and leave the system if the server’s idle time overextends or if the arriving customers find the system to be full and will not enter the system. This article analyzes the impatient demands caused by the N-policy server to an inventory system. In the steadystate, we obtain the joint probability distribution of the level of inventory and the number of customers in the system. We analyze some measures of system performance and get the total expected cost rate in the steadystate. We present a beneficial cost function and confer the numerical illustration that describes the impact of impatient customers caused by N-policy on the inventory system’s total expected cost rate.