Neural network demand models and evolutionary optimisers for dynamic pricing

Dynamic pricing is a pricing strategy where price for the product changes according to the expected demand for it. Some work on using neural network for dynamic pricing have been previously reported, such as for forecasting the demand and modelling consumer choices. However, little work has been done in using them for optimising pricing policies. In this paper, we describe how neural networks and evolutionary algorithms can be combined together to optimise pricing policies. Particularly, we build a neural network based demand model and use evolutionary algorithms to optimise policy over build model. There are two key benefits of this approach. Use of neural network makes it flexible enough to model a range of different demand scenarios occurring within different products and services, and the use of evolutionary algorithm makes it versatile enough to solve very complex models. We also evaluate the pricing policies found by neural network based model to that found by other widely used demand models. Our results show that proposed model is more consistent, adapts well in a range of different scenarios, and in general, finds more accurate pricing policy than other three compared models.

► Build a neural network based model to represent interaction between price and demand.
► Used evolutionary algorithms to find optimised pricing policy.
► Showed that the proposed model is consistent and adapts well in different scenarios.
► Proposed model finds more accurate pricing policy than other three compared models.