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Dynamic pricing models for electronic business

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Abstract

Dynamic pricing is the dynamic adjustment of prices to consumers depending upon the value these customers attribute to a product or service. Today's digital economy is ready for dynamic pricing; however recent research has shown that the prices will have to be adjusted in fairly sophisticated ways, based on sound mathematical models, to derive the benefits of dynamic pricing. This article attempts to survey different models that have been used in dynamic pricing. We first motivate dynamic pricing and present underlying concepts, with several examples, and explain conditions under which dynamic pricing is likely to succeed. We then bring out the role of models in computing dynamic prices. The models surveyed include inventory-based models, data-driven models, auctions, and machine learning. We present a detailed example of an e-business market to show the use of reinforcement learning in dynamic pricing.

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Authors and Affiliations

  1. Computer Science & Automation, Indian Institute of Science, 560 012, Bangalore, India

    Y. Narahari & C. V. L. Raju

  2. General Motors India Science Laboratory, 560 066, Bangalore, India

    K. Ravikumar

  3. Dept. of Computer Science, Birla Institute of Technology and Science, 333 031, Pilani, India

    Sourabh Shah

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  1. Y. Narahari
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  2. C. V. L. Raju
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  3. K. Ravikumar
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  4. Sourabh Shah
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Narahari, Y., Raju, C.V.L., Ravikumar, K. et al. Dynamic pricing models for electronic business. Sadhana 30, 231–256 (2005). https://doi.org/10.1007/BF02706246

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