Dynamic Pricing and Learning with Long-term Reference Effects

arXiv:2402.12562v1 Announce Type: new
Abstract: We consider a dynamic pricing problem where customer response to the current price is impacted by the customer price expectation, aka reference price. We study a simple and novel reference price mechanism where reference price is the average of the past prices offered by the seller. As opposed to the more commonly studied exponential smoothing mechanism, in our reference price mechanism the prices offered by seller have a longer term effect on the future customer …

abstract arxiv cs.gt cs.lg current customer dynamic dynamic pricing effects long-term novel price pricing reference simple study type