Bayesian solution to pricing and inventory control under unknown demand distribution

Bayesian solution to pricing and inventory control under unknown demand distribution

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Article ID: iaor2007555
Country: Netherlands
Volume: 34
Issue: 5
Start Page Number: 517
End Page Number: 524
Publication Date: Sep 2006
Journal: Operations Research Letters
Authors: ,
Keywords: stochastic processes
Abstract:

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.

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