Time-consistent, risk-averse dynamic pricing

Rouven Schur, Jochen Gönsch and Michael Hassler

European Journal of Operational Research, 2019, vol. 277, issue 2, 587-603

Abstract: Many industries use dynamic pricing on an operational level to maximize revenue from selling a fixed capacity over a finite horizon. Classical risk-neutral approaches do not accommodate the risk aversion often encountered in practice. When risk aversion is considered, time-consistency becomes an important issue. In this paper, we use a dynamic coherent risk-measure to ensure that decisions are actually implemented and only depend on states that may realize in the future. In particular, we use the risk measure Conditional Value-at-Risk (CVaR), which recently became popular in areas like finance, energy or supply chain management.

Keywords: Revenue management; Dynamic pricing; Risk aversion; Conditional value-at-risk (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:277:y:2019:i:2:p:587-603

DOI: 10.1016/j.ejor.2019.02.038

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