Optimal Pricing Schemes for Identical Items with Time-Sensitive Buyers

Abstract

Time or money? That is a question! In this paper, we consider this dilemma in the pricing regime, in which we try to find the optimal pricing scheme for identical items with heterogenous time-sensitive buyers. We characterize the revenue-optimal solution and propose an efficient algorithm to find it in a Bayesian setting. Our results also demonstrate the tight ratio between the value of wasted time and the seller's revenue, as well as that of two common-used pricing schemes, the k-step function and the fixed pricing. To explore the nature of the optimal scheme in the general setting, we present the closed forms over the product distribution and show by examples that positive correlation between the valuation of the item and the cost per unit time could help increase revenue. To the best of our knowledge, it is the first step towards understanding the impact of the time factor as a part of the buyer cost in pricing problems, in the computational view.