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Non-cooperative competition among revenue maximizing service providers with demand learning

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  • Kwon, Changhyun
  • Friesz, Terry L.
  • Mookherjee, Reetabrata
  • Yao, Tao
  • Feng, Baichun

Abstract

This paper recognizes that in many decision environments in which revenue optimization is attempted, an actual demand curve and its parameters are generally unobservable. Herein, we describe the dynamics of demand as a continuous time differential equation based on an evolutionary game theory perspective. We then observe realized sales data to obtain estimates of parameters that govern the evolution of demand; these are refined on a discrete time scale. The resulting model takes the form of a differential variational inequality. We present an algorithm based on a gap function for the differential variational inequality and report its numerical performance for an example revenue optimization problem.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 197 (2009)
Issue (Month): 3 (September)
Pages: 981-996

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Handle: RePEc:eee:ejores:v:197:y:2009:i:3:p:981-996

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Web page: http://www.elsevier.com/locate/eor

Related research

Keywords: Revenue management Pricing Demand learning Differential games Kalman filters;

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Cited by:
  1. Chung, Sung H. & Weaver, Robert D. & Friesz, Terry L., 2012. "Oligopolies in pollution permit markets: A dynamic game approach," International Journal of Production Economics, Elsevier, vol. 140(1), pages 48-56.

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