Joint Inventory and Pricing Decisions

The problem of assigning inventory to different pricing levels is considered. The problem is motivates by hoteliers assigning rooms to an opaque discounter. It can also be thought of as assigning seats and fares to two different classes where the cheaper class sells out first. The approach can be used for retail promotions such as “all items 20% of during the first hour of business”. While the operations literature has looked extensively at joint pricing and inventory decisions in the single product setting, we extend the literature and provide closed form solutions to the multiproduct setting where demand across the products is dependent and the products share resources.