Abstract

http://ssrn.com/abstract=1983308
 
 

References (25)



 
 

Citations (1)



 
 

Footnotes (11)



 


 



Dynamic Pricing with Financial Milestones: Feedback-Form Policies


Omar Besbes


Columbia Business School - Decision Risk and Operations

Costis Maglaras


Columbia Business School - Decision Risk and Operations

November 30, 2011

Management Science, Forthcoming
Columbia Business School Research Paper No. 12-8

Abstract:     
We study a seller that starts with an initial inventory of goods, has a target horizon over which to sell the goods, and is subject to a set of financial milestone constraints on the revenues and sales that need to be achieved at different time points along the sales horizon. We characterize the revenue maximizing dynamic pricing policy for the seller and highlight the effect of revenue and sales milestones on its structure. The optimal policy can be written in feedback form, where the price at each point in time is selected so as to track the most stringent among all future milestones. Building on that observation, we propose a discrete-review policy that aims to dynamically track the appropriate milestone constraint, and show that this simple and practical policy is near-optimal in settings with large initial capacity and long sales horizons even in settings with no advance demand model information. One motivating application comes from the sales of new multi-unit, residential real estate developments, where intermediate milestone constraints play an important role in their financing and construction.

Number of Pages in PDF File: 42

Keywords: Revenue management, dynamic pricing, market uncertainty, estimation, feedback, real estate, asymptotic analysis

Accepted Paper Series


Download This Paper

Date posted: January 12, 2012  

Suggested Citation

Besbes, Omar and Maglaras, Costis, Dynamic Pricing with Financial Milestones: Feedback-Form Policies (November 30, 2011). Management Science, Forthcoming; Columbia Business School Research Paper No. 12-8. Available at SSRN: http://ssrn.com/abstract=1983308

Contact Information

Omar Besbes (Contact Author)
Columbia Business School - Decision Risk and Operations ( email )
New York, NY
United States

Costis Maglaras
Columbia Business School - Decision Risk and Operations ( email )
New York, NY
United States

Feedback to SSRN


Paper statistics
Abstract Views: 756
Downloads: 127
Download Rank: 132,785
References:  25
Citations:  1
Footnotes:  11

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.375 seconds