Dynamic Pricing for Multiple Products with Consumer Reference Price Effect

This paper addresses the problem of pricing for a retailer selling multiple products to a stream of repeated customers over an infinite time horizon. We propose a dynamic pricing model based on the notion of store-level reference price. We derive an optimal pricing policy and prove its monotone convergence in a monopoly context. We derive an analytical result for the optimal prices. Also, we address a comparison between the store-level and the product-level models and between optimal and myopic policies.