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dc.contributor.authorChen, Yiwei
dc.contributor.authorFarias, Vivek F.
dc.date.accessioned2019-03-07T20:10:24Z
dc.date.available2019-03-07T20:10:24Z
dc.date.issued2018-08
dc.date.submitted2015-05
dc.identifier.issn0364-765X
dc.identifier.issn1526-5471
dc.identifier.urihttp://hdl.handle.net/1721.1/120829
dc.description.abstractWe consider the canonical revenue management (RM) problem wherein a seller must sell an inventory of some product over a finite horizon via an anonymous, posted price mechanism. Unlike typical models in RM, we assume that customers are forward looking. In particular, customers arrive randomly over time and strategize about their times of purchases. The private valuations of these customers decay over time and the customers incur monitoring costs; both the rates of decay and these monitoring costs are private information. This setting has resisted the design of optimal dynamic mechanisms heretofore. Optimal pricing schemes-an almost necessary mechanism format for practical RM considerations-have been similarly elusive. The present paper proposes a mechanism we dub robust pricing. Robust pricing is guaranteed to achieve expected revenues that are at least within 29% of those under an optimal (not necessarily posted price) dynamic mechanism. We thus provide the first approximation algorithm for this problem. The robust pricing mechanism is practical, since it is an anonymous posted price mechanism and since the seller can compute the robust pricing policy for a problem without any knowledge of the distribution of customer discount factors and monitoring costs. The robust pricing mechanism also enjoys the simple interpretation of solving a dynamic pricing problem for myopic customers with the additional requirement of a novel “restricted sub-martingale constraint” on prices that discourages rapid discounting. We believe this interpretation is attractive to practitioners. Finally, numerical experiments suggest that the robust pricing mechanism is, for all intents, near optimal.en_US
dc.publisherInstitute for Operations Research and the Management Sciences (INFORMS)en_US
dc.relation.isversionofhttp://dx.doi.org/10.1287/moor.2017.0897en_US
dc.rightsCreative Commons Attribution-Noncommercial-Share Alikeen_US
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/4.0/en_US
dc.sourceMIT web domainen_US
dc.titleRobust Dynamic Pricing with Strategic Customersen_US
dc.typeArticleen_US
dc.identifier.citationChen, Yiwei and Vivek F. Farias. “Robust Dynamic Pricing with Strategic Customers.” Mathematics of Operations Research 43, 4 (November 2018): 1119–1142 © 2018 INFORMSen_US
dc.contributor.mitauthorChen, Yiwei
dc.contributor.mitauthorFarias, Vivek F.
dc.relation.journalMathematics of Operations Researchen_US
dc.eprint.versionOriginal manuscripten_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/NonPeerRevieweden_US
dc.date.updated2019-02-12T15:54:14Z
dspace.orderedauthorsChen, Yiwei; Farias, Vivek F.en_US
dspace.embargo.termsNen_US
dc.identifier.orcidhttps://orcid.org/0000-0002-5856-9246
mit.licenseOPEN_ACCESS_POLICYen_US


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