We are happy to announce that the paper "Stochastic Dynamic Pricing with Strategic Customers and Reference Price Effects" by Rainer Schlosser has won the Best Paper Award at the 8th International Conference on Operations Research and Enterprise Systems (ICORES 2019). The award was received on February 21, 2019 in Prague, Czech Republic.
In many markets, customers strategically time their purchase by anticipating future prices and by checking offer prices multiple times. Typically, customers base their decisions on historical reference prices and their individual willingness-to-pay, which can change over time. For sellers it is challenging to derive successful pricing strategies as customers’ reservation prices cannot be observed. In this paper, we present a stochastic dynamic finite horizon framework to determine optimized price adjustments for selling perishable goods in the presence of strategic customers, which (i) recur and (ii) anticipate future prices based on reference prices. We analyze the impact of different strategic behaviors on expected profits and the evolution of sales. Compared to myopic settings, we find that recurring customers lead to higher average prices, delayed sales, and increased profits. The presence of forward-looking customers has opposing but less intense effects.