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Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions

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  • Wedad Elmaghraby

    (School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332)

  • P{i}nar Keskinocak

    (School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332)

Abstract

The benefits of dynamic pricing methods have long been known in industries, such as airlines, hotels, and electric utilities, where the capacity is fixed in the short-term and perishable. In recent years, there has been an increasing adoption of dynamic pricing policies in retail and other industries, where the sellers have the ability to store inventory. Three factors contributed to this phenomenon: (1) the increased availability of demand data, (2) the ease of changing prices due to new technologies, and (3) the availability of decision-support tools for analyzing demand data and for dynamic pricing. This paper constitutes a review of the literature and current practices in dynamic pricing. Given its applicability in most markets and its increasing adoption in practice, our focus is on dynamic (intertemporal) pricing in the presence of inventory considerations.

Suggested Citation

  • Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    • Handle: RePEc:inm:ormnsc:v:49:y:2003:i:10:p:1287-1309
    DOI: 10.1287/mnsc.49.10.1287.17315
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