PRICING PERISHABLE PRODUCTS WITH COMPOUND POISSON DEMANDS

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

5 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)289-306
Journal / PublicationProbability in the Engineering and Informational Sciences
Volume25
Issue number3
Online published17 May 2011
Publication statusPublished - Jul 2011
Externally publishedYes

Abstract

We consider the dynamic pricing problem of perishable products in a system with a constant production rate. Potential demands arrive according to a compound Poisson process, and are price-sensitive. We carry out the sample path analysis of the inventory process and by using level-crossing method, we derive its stationary distribution given a pricing function. Based on the distribution, we express the average profit function. By a stochastic comparison approach, we characterize the pricing strategy given different customers willingness-to-pay functions. Finally, we provide an approximation algorithm to calculate the optimal pricing function. © Copyright Cambridge University Press 2011.

Research Area(s)

  • dynamic pricing, level-crossing, perishable inventory, revenue management