Offline Feature-Based Pricing Under Censored Demand: A Causal Inference Approach

Jingwen Tang (), Zhengling Qi (), Ethan Fang () and Cong Shi ()
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Jingwen Tang: Department of Management, Miami Herbert Business School, University of Miami, Coral Gables, Florida 33146
Zhengling Qi: Department of Decision Sciences, George Washington University, Washington, District of Columbia 20052
Ethan Fang: Department of Biostatistics and Bioinformatics, Duke University, Durham, North Carolina 27708
Cong Shi: Department of Management, Miami Herbert Business School, University of Miami, Coral Gables, Florida 33146

Manufacturing & Service Operations Management, 2025, vol. 27, issue 2, 535-553

Abstract: Problem definition : We study a feature-based pricing problem with demand censoring in an offline, data-driven setting. In this problem, a firm is endowed with a finite amount of inventory and faces a random demand that is dependent on the offered price and the features (from products, customers, or both). Any unsatisfied demand that exceeds the inventory level is lost and unobservable. The firm does not know the demand function but has access to an offline data set consisting of quadruplets of historical features, inventory, price, and potentially censored sales quantity. Our objective is to use the offline data set to find the optimal feature-based pricing rule so as to maximize the expected profit. Methodology/results : Through the lens of causal inference, we propose a novel data-driven algorithm that is motivated by survival analysis and doubly robust estimation. We derive a finite sample regret bound to justify the proposed offline learning algorithm and prove its robustness. Numerical experiments demonstrate the robust performance of our proposed algorithm in accurately estimating optimal prices on both training and testing data. Managerial implications : The work provides practitioners with an innovative modeling and algorithmic framework for the feature-based pricing problem with demand censoring through the lens of causal inference. Our numerical experiments underscore the value of considering demand censoring in the context of feature-based pricing.

Keywords: offline learning; feature-based pricing; demand censoring; causal inference; regret analysis (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:27:y:2025:i:2:p:535-553

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