American Society of Civil Engineers


A Robust Optimization Model for Dynamic Pricing over Finite Horizons


by Liping Xu, (Beijing Research Center of Urban System Engineering, Beijing Academy of Science and Technology, No.27 North Road, xisanhua, Haidian District, Beijing 100089, P. R. China. E-mail: xuliping1970@live.cn.) and Jinlin Li, (School of Management and Economics, Beijing Institute of Technology, 5 South Zhongguancun Street, Haidian District, Beijing 100081, P. R. China. E-mail: jinlinlin@bit.edu.cn.)
Section: Volume IV - System Optimization and Simulation Models, pp. 3584-3593, (doi:  http://dx.doi.org/10.1061/41139(387)500)

Note: Acknowledgment: This paper is supported by National Natural Science Funds of China under grant 60776817.

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Document type: Conference Proceeding Paper
Part of: ICLEM 2010: Logistics For Sustained Economic Development: Infrastructure, Information, Integration
Abstract: A robust optimization model is applied to the problem of pricing perishable products over a finite horizon with uncertain demand in this paper. This proposed approach takes into account the uncertainty of the demand without assuming a specific probability distribution, while providing insight into the corresponding optimal policy. It also allows adjustment of the level of robustness of the optimal prices to trade off performance and protection against uncertainty by two parameters namely Robust Level which resolves pricing not of a single product, but also multiple products. An attractive feature of the proposed approach is that dynamic pricing and overbooking can be considered simultaneously.


ASCE Subject Headings:
Optimization models
Pricing
Logistics