Research Details

Abstract

We consider the single-item dynamic pricing problem in an asymptotic regime where the expected demand over the selling horizon tends to infinity but the initial inventory level remains fixed. Our main result provides asymptotics for the optimal expected revenue, pricing policy and purchasing probability policy in the high demand regime. We also provide easy-to-implement pricing policies that are shown to be asymptotically optimal in this regime and, in order to gain further managerial insights, compare the performance of the optimal pricing policy against an upper bound provided by a deterministic version of the problem as in Gallego and Van Ryzin (1994). Finally, several numerical experiments are conducted in order to assess the quality and performance of our approximations.

Type

Working Paper

Author(s)

Tarek Abdallah, Arash Asadpour, Josh Reed

Date Published

2023

Citations

Abdallah, Tarek, Arash Asadpour, and Josh Reed. 2023. Dynamic Pricing in the High Demand Regime.