Pricing with contextual elasticity and heteroscedastic valuation
AUTHORs: 
Jianyu Xu, Yu-Xiang WangAuthors Info & Claims
Article No.: 2279, Pages 55286 - 55304
Abstract
We study an online contextual dynamic pricing problem, where customers decide whether to purchase a product based on its features and price. We introduce a novel approach to modeling a customer's expected demand by incorporating feature-based price elasticity, which can be equivalently represented as a valuation with heteroscedastic noise. To solve the problem, we propose a computationally efficient algorithm called "Pricing with Perturbation (PwP)", which enjoys an O(√dT log T) regret while allowing arbitrary adversarial input context sequences. We also prove a matching lower bound at Ω(√dT) to show the optimality regarding d and T (up to log T factors). Our results shed light on the relationship between contextual elasticity and heteroscedastic valuation, providing insights for effective and practical pricing strategies.
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July 2024
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Published: 03 January 2025
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