Bayesian solution to pricing and inventory control under unknown demand distribution

Authors:
Ju-Liang Zhang;Jian Chen
Affiliations:
Chinese Academy of Sciences Research Center on Data Technology & Knowledge Economy, Graduate University of the Chinese Academy of Sciences, Chinese Academy of Sciences, Beijing 100080, China;Department of Management Science and Engineering, School of Economics and Management, Tsinghua University, Beijing 100084, China
Venue:
Operations Research Letters
Year:
2006

Citing 3
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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.