【Academic Seminar】Context-Based Dynamic Pricing with Online Clustering - Mr. Sentao Miao

Topic: Context-Based Dynamic Pricing with Online Clustering

Speaker: Mr. Sentao Miao, University of Michigan

Time and Date: 11:00 - 12:00, Monday, December 16, 2019

Venue: Boardroom, Dao Yuan Building

Abstract：

We consider a context-based dynamic pricing problem of online products, which have low sales. Sales data from Alibaba, a major global online retailer, illustrate the prevalence of low-sale products. For these products, existing single-product dynamic pricing algorithms do not work well due to insufficient data samples. To address this challenge, we propose pricing policies that concurrently perform clustering over products and set individual pricing decisions on the fly. By clustering data and identifying products that have similar demand patterns, we utilize sales data from products within the same cluster to improve demand estimation for better pricing decisions. We evaluate the algorithms using regret, and the result shows that when product demand functions come from multiple clusters, our algorithms significantly outperform traditional single product pricing policies. Numerical experiments demonstrate that the proposed policies, compared with several benchmark policies, increase the revenue. The results show that online clustering is an effective approach to tackling dynamic pricing problems associated with low-sale products. Our algorithms were further implemented in a field study at Alibaba with 40 products for 30 consecutive days, and compared to the products which use business-as-usual pricing policy of Alibaba. The results from the field experiment show that the overall revenue increased by 10.14%.

Biography：

Sentao Miao is a PhD candidate, supervised by Prof. Xiuli Chao, at Department of Industrial and Operations Engineering at University of Michigan. For methodologies, Sentao Miao focuses on statistical and machine learning algorithms such as online learning, multi-arm bandit, reinforcement learning, etc. For applications, he mainly works on operations management problems such as dynamic pricing, assortment selection, inventory control, etc. Sentao Miao obtained his Bachelor degree in Mathematics at Jacobs University Bremen, Germany. In college, he mainly worked on computational methods and approximation algorithms for high dimensional data.