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Designing the price controller for the dynamic pricing of self-storage

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  • Lijian Chen
  • Shanling Li
  • Derek Wang

Abstract

In this paper, we study the dynamic pricing practices in the self-storage industry by introducing the widely used price controller, a term borrowed from control theories, among all self-storage service providers. Most self-storage service providers adopt the price controller method because of its effectiveness, simplicity, and straightforwardness. The price controller method adjusts the price per store's rental performance over the period. With noises on both move-ins and move-outs, the price controller method is a stochastic control model to determine the pricing trajectory at a sequence of discrete time spots to maximize the expected revenue growth. We find that the price controller method may outperform the myopic pricing method by evolving the pricing decision toward its optimum. Also, we discuss several unique properties of the self-storage industry and gain significant knowledge by analyzing the necessity of issuing a rental lease incentive to new customers.

Suggested Citation

  • Lijian Chen & Shanling Li & Derek Wang, 2019. "Designing the price controller for the dynamic pricing of self-storage," International Journal of Production Research, Taylor & Francis Journals, vol. 57(9), pages 2656-2674, May.
    • Handle: RePEc:taf:tprsxx:v:57:y:2019:i:9:p:2656-2674
    DOI: 10.1080/00207543.2019.1587191
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