Dynamic Pricing and Inventory Control for Multiple Products
Journal of Revenue & Pricing Management 3, 303-319 (January 2005)
20 Pages Posted: 1 Mar 2014 Last revised: 3 Mar 2014
Date Written: 2005
A periodical multi-product pricing and inventory control problem with applications to production planning and airline revenue management is studied. The objective function of the single-period model is shown to be convex for certain types of demand distributions, thus tractable for large instances. A heuristic is proposed to solve the more complex multi-period problem, which is an interesting combination of linear and dynamic programming. Numerical experiments and theoretical bounds on the optimal expected revenue suggest that the extent to which a dynamic policy based on a stochastic model will outperform a simple static policy based on a deterministic model depends on the level of demand variability as measured by the coefficient of variation.
Keywords: dynamic pricing, inventory control, multiple products, joint pricing, inventory control
JEL Classification: C61, D40, D45,
Suggested Citation: Suggested Citation