Heuristic Rules for the Dynamic Pricing Problem

This paper is devoted to the development of heuristics for dynamic pricing problem. A discrete time model on fixed horizon proposed. It applicable products that satisfy two properties: 1) product value expires at a certain predetermined date, and 2) consumers demand most single unit product. type structure allows deriving simple system recursive equations optimal prices using programming techniques. Optimal policy expressed as function expiration inventory levels unsold products. An analytical solution this problem was obtained special cases, while general case, numerical algorithm has been developed. Qualitative characteristics are established, their implications dynamics inventories discussed. Based these observations, heuristic rule price adjustments Performance evaluated against fixed-price policies Monte-Carlo experiments. Results demonstrate high efficiency proposed strategy its even simpler derivatives. Heuristics’ adaptability ease implementation should make it suitable attractive small medium businesses.