Lecture: Multi-Period Pricing of Perishable Products
Professor Georgia Perakis from the Sloan School of Management at MIT will deliver the second lecture in the Spring 2006 Operations Research / Management Science Seminar series.
Title: Multi-Period Pricing of Perishable Products; Competition, Uncertainty and Learning
Abstract: In this paper we discuss a model for dynamically pricing multiple perishable products that sellers need to sell over a finite time horizon (i.e. in this setting, each seller has a fixed inventory of several products that he/she needs to sell over a finite time horizon). We are considering an oligopolistic market and assume that sellers compete through pricing. Applications in mind include pricing
airline tickets in the face of competitor airlines, as well as selling seasonal products in the retail industry in the presence of competitors. The model we present addresses the competitive aspect of the problem but also the presence of demand uncertainty. In particular, we propose a model that uses ideas from quasi-variational inequalities (in order to address the aspect of competition) and
ideas from robust optimization (in order to address uncertainty of demand). The latter allows us to propose a model that is tractable and does not assume any particular type of distribution for the uncertain parameters of demand. Furthermore, time permitting, we will discuss how we enhance the model to include a setting where sellers learn their demand and try to understand their competitors' demands as they collect more data on prices for them and their competitors as time progresses and the selling horizon unfolds. We use ideas from MPECs to model this enhanced model of joint pricing and demand learning. Finally we discuss some insights.
This series is organized by the UMass Amherst INFORMS Student Chapter. Support for this series is provided by the Isenberg School of Management, the Department of Finance and Operations Management, and the John F. Smith Memorial Fund.
Check here for more details about this speaker series.
