Performance bounds on optimal fixed prices

Date
2013
Authors
Şen, A.
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Source Title
Operations Research Letters
Print ISSN
0167-6377
Electronic ISSN
1872-7468
Publisher
Volume
41
Issue
5
Pages
530 - 534
Language
English
Type
Article
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Abstract

We consider the problem of selling a fixed stock of items over a finite horizon when the buyers arrive following a Poisson process. We obtain a general lower bound on the performance of using a fixed price rather than dynamically adjusting the price. The bound is 63.21% for one unit of inventory, and it improves as the inventory increases. For the one-unit case, we also obtain tight bounds: 89.85% for the constant-elasticity and 96.93% for the linear price-response functions.

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Keywords
Dynamic pricing, Heuristics, Revenue management, Yield management, Finite horizons, Performance bounds, Poisson process, Price-response functions
Citation
Published Version (Please cite this version)