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Dynamic Pricing Without Knowing The Demand Function: Risk Bounds And Near-Optimal Algorithms, Omar Besbes, Assaf Zeevi Nov 2009

Dynamic Pricing Without Knowing The Demand Function: Risk Bounds And Near-Optimal Algorithms, Omar Besbes, Assaf Zeevi

Operations, Information and Decisions Papers

We consider a single-product revenue management problem where, given an initial inventory, the objective is to dynamically adjust prices over a finite sales horizon to maximize expected revenues. Realized demand is observed over time, but the underlying functional relationship between price and mean demand rate that governs these observations (otherwise known as the demand function or demand curve) is not known. We consider two instances of this problem: (i) a setting where the demand function is assumed to belong to a known parametric family with unknown parameter values; and (ii) a setting where the demand function is assumed to belong ...