Bayesian solution to pricing and inventory control under unknown demand distribution

This paper addresses the simultaneous determination of pricing and inventory control with learning. The Bayesian formulation of this model results in a dynamic program with a multi-dimension state-space. We show that the state-space of the Bayesian model can be reduced under some conditions and characterize the structure of the optimal policy.

[1]  Herbert E. Scarf,et al.  Studies in applied probability and management science , 1962 .

[2]  H. Scarf.  Bayes Solutions of the Statistical Inventory Problem , 1959 .

[3]  S. Karlin.  Dynamic Inventory Policy with Varying Stochastic Demands , 1960 .

[4]  Saroja Subrahmanyan,et al.  Developing optimal pricing and inventory policies for retailers who face uncertain demand , 1996 .

[5]  W. Hopp,et al.  DYNAMIC PRICING AND INVENTORY CONTROL : THE VALUE OF DEMAND LEARNING , 2004 .

[6]  Amy Hing-Ling Lau,et al.  The Newsboy Problem With Price-Dependent Demand Distribution , 1988 .

[7]  E. Mills.  Uncertainty and Price Theory , 1959 .

[8]  Awi Federgruen,et al.  Combined Pricing and Inventory Control Under Uncertainty , 1999, Oper. Res..

[9]  Katy S. Azoury.  Bayes Solution to Dynamic Inventory Models Under Unknown Demand Distribution , 1985 .

[10]  G. Ryzin,et al.  Optimal dynamic pricing of inventories with stochastic demand over finite horizons , 1994 .

[11]  L.Hakan Polatog̈lu.  Optimal order quantity and pricing decisions in single-period inventory systems , 1991 .

[12]  S. Kimes.  Yield management: A tool for capacity-considered service firms , 1989 .

[13]  Evan L. Porteus.  Chapter 12 Stochastic inventory theory , 1990 .

[14]  T. M. Whitin.  Inventory Control and Price Theory , 1955 .

[15]  E. Zabel.  Monopoly and Uncertainty , 1970 .

[16]  A. Markandya,et al.  Monopoly with random demand , 1971 .

[17]  N. Petruzzi,et al.  Dynamic pricing and inventory control with learning , 2002 .

[18]  Sridhar Seshadri,et al.  Monotone Forecasts , 2004, Oper. Res..