Pricing and Learning with Uncertain Demand
M. Lobo and S. Boyd
Working draft, November 2003.
Practical policies for the monopolistic pricing problem with uncertain demand are discussed (for discrete time, continuous prices and demand, in a linear and Gaussian setting). With this model, the introduction of price variation is rationally justified, to allow for a better estimate of the elasticity of demand, and increased profits due to better pricing. An approximation of the dynamic programming solution is introduced, exploiting convex optimization methods for computational tractability. Numerous experiments are described.