Using quantitative models for setting retail prices

Products that have a short selling season face high uncertainty in demand. Retailers who sell such products therefore find the task of pricing and inventory challenging. Many retailers consider making these decisions as an art form and do not use quantitative models that are developed by researchers. Describes how retailers typically make pricing and inventory decisions and also reviews quantitative models that have been developed by researchers to improve on one or more of these decisions. A classification of these models is developed and how they can assist the retailer is explained. A simple explanation of two mathematical tools, Bayesian updating of information and dynamic programming, which are commonly mentioned in the literature are also given.