Online Pricing and Allocation with Demand Learning and Fulfillment Cost

Abstract:We study online learning for a seller that jointly chooses per-period inventory positions and a uniform price, then fulfills realized demand through a downstream allocation. The main difficulty is not only demand learning: the price shifts demand and reshapes the transportation LP, making the population objective globally non-convex and non-smooth. To solve this problem, we propose OCSAA, an algorithm that exploits demand observations through counterfactual translation and proposes joint (price, inventory) decisions through lower-confidence optimism. OCSAA admits a polynomial-time additive-accuracy implementation for rational-polytope inventory sets. We prove a high-probability $\widetilde O(\sqrt T)$ regret guarantee and establish a matching-in-$T$ information-theoretic lower bound. Our results illustrate an effective integration of statistical learning methodologies with complex operations research problems.

Machine Learning (cs.LG); Optimization and Control (math.OC); Machine Learning (stat.ML)

arXiv:2501.18049 [cs.LG]

(or arXiv:2501.18049v3 [cs.LG] for this version)