Dynamic Assortment Selection and Pricing with Censored Preference Feedback

Jung-hun Kim, Min-hwan Oh

Keywords: Dynamic Pricing, Preference Feedback, Bandits

TL;DR: In this study, we investigate the problem of dynamic multi-product selection and pricing by introducing a novel framework based on a censored multinomial logit (C-MNL) choice model.

Abstract:

In this study, we investigate the problem of dynamic multi-product selection and pricing by introducing a novel framework based on a censored multinomial logit (C-MNL) choice model. In this model, sellers present a set of products with prices, and buyers filter out products priced above their valuation, purchasing at most one product from the remaining options based on their preferences. The goal is to maximize seller revenue by dynamically adjusting product offerings and prices, while learning both product valuations and buyer preferences through purchase feedback. To achieve this, we propose a Lower Confidence Bound (LCB) pricing strategy. By combining this pricing strategy with either an Upper Confidence Bound (UCB) or Thompson Sampling (TS) product selection approach, our algorithms achieve regret bounds of $\tilde{O}(d^{\frac{3}{2}}\sqrt{T/\kappa})$ and $\tilde{O}(d^{2}\sqrt{T/\kappa})$, respectively. Finally, we validate the performance of our methods through simulations, demonstrating their effectiveness.

Primary Area: learning theory

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Submission Number: 2716