Price optimization with reference price effects: A generalized Benders’ decomposition method and a myopic heuristic approach

We consider a multi-period revenue maximization and pricing optimization problem in the presence of reference prices. We formulate the problem as a mixed integer nonlinear program and develop a generalized Benders’ decomposition algorithm to solve it. In addition, we propose a myopic heuristic and discuss the conditions under which it produces efficient solutions. We provide analytical results as well as numerical computations to illustrate the …