Learning market prices in real-time supply chain management

Authors:
David A. Burke;Kenneth N. Brown;S. Armagan Tarim;Brahim Hnich
Affiliations:
Centre for Telecommunications Value-chain Research, University College Cork, Ireland and Cork Constraint Computation Centre, University College Cork, Ireland;Centre for Telecommunications Value-chain Research, University College Cork, Ireland and Cork Constraint Computation Centre, University College Cork, Ireland;Centre for Telecommunications Value-chain Research, University College Cork, Ireland and Department of Management, Hacettepe University, Ankara, Turkey;Faculty of Computer Sciences, Izmir University of Economics, Turkey
Venue:
Computers and Operations Research
Year:
2008

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Abstract

This paper proposes a model for dynamic pricing that combines knowledge of production capacity and existing commitments, reasoning about uncertainty and learning of market conditions in an attempt to optimise expected profits. In particular, the market conditions are represented as a set of probabilities over the success rate of product prices, and those prices are learned online as the market develops. The dynamic pricing model is integrated into a real-time supply chain management agent using the Trading Agent Competition Supply Chain Management game as a test framework. We evaluate the agent experimentally in competition with other supply chain agents, and demonstrate the benefits of incorporating more market data into the dynamic pricing mechanism.