Multiproduct Pricing with Discrete Price Sets

Abstract

Dynamic pricing is a well-known revenue management technique used by firms to maximize their revenues. In industries such as fashion retail and airlines, it is observed in practice that firms vary the prices of their products, through time, only among certain pre-fixed discrete price points; for example, in fashion retail, products are first sold at a base price and then later at, say, 10%, 20%, 30% discounted prices. In such discrete-price practices, when the number of products offered by a firm is large, it is mathematically challenging to determine the optimal pricing decisions. In “Multiproduct Pricing with Discrete Price Sets,” Manchiraju, Dawande, and Janakiraman design pricing algorithms that are fast and result in near-optimal revenues.