title   
  

A continuous model for dynamic pricing under costly price modifications

Daşcı, Abdullah and Huang, Rongbing (2013) A continuous model for dynamic pricing under costly price modifications. [Working Paper / Technical Report] Sabanci University ID:UNSPECIFIED

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Abstract

This paper presents a heuristic method to solve a dynamic pricing problem under costly price modifications. This is a remarkably difficult problem that is solvable only under very few special cases. The method is applied to a more general form of the problem and is numerically tested for a variety of demand functions in the literature. The results show that the method is quite accurate, approximating the optimal profit within usually much less than 1\%. A more important result is that the accuracy tend to be much greater as the number of price changes increases, precisely when the underlying optimization problem becomes much harder, which makes this approach particularly desirable.

Item Type:Working Paper / Technical Report
Uncontrolled Keywords:Revenue management, dynamic pricing, continuous approximation
Subjects:UNSPECIFIED
ID Code:23540
Deposited By:Abdullah Daşcı
Deposited On:09 Jan 2014 16:11
Last Modified:09 Jan 2014 16:11

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