Capacity-constrained multiple-market price discrimination

This paper studies a multiple-market price discrimination problem with different markets’ demand elasticity and supply constraints, whereas the markets share a common capacity. We model the problem as a continuous nonlinear knapsack problem, and propose an efficient algorithm for solving the optimal solution after exploring the structural properties of the studied problem. Sensitivity analysis is done for better understanding the behavior of the problem, and numerical results are provided to show the performance of the proposed method.