Markov Decision Process in the Problem
of Dynamic Pricing Policy

Yu. A. Chizhov and A. N. Borisov

Riga Technical University,

1 Kalku Str., Riga, LV-1658 Latvia

e-mail: jurij.ch@gmail.com, arkadijs.borisovs@cs.rtu.lv

Received March 29, 2011; in final form, September 29, 2011

Abstract—Markov decision processes (MDP) are widely used in problems whose solutions may be rep-
resented by a certain series of actions. A lot of papers demonstrate successful MDP use in model prob-
lems, robotic control problems, planning problems, etc. In addition, economic problems have the prop-
erty of multistep motion towards a goal as well. This paper is dedicated to MDP application to the prob-
lem of pricing policy management. The problem of dynamic pricing is stated in terms of MDP.
Additional attention is paid to the method of constructing an MDP model based on data mining. Based
on the data on sales of an actual industrial plant, construction of an MDP model that includes the search-
ing for and generalization of regularities is demonstrated.

Keywords: Markov decision process, dynamic pricing policy, MDP model construction

DOI: 10.3103/S0146411611060058

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