Deep reinforcement learning algorithms for dynamic pricing and inventory management of perishable products

Abstract

A perishable product has a limited shelf life, and inefficient management often leads to waste. This paper focuses on dynamic pricing and inventory management strategies for perishable products. By implementing effective inventory control and the right pricing policy, it is possible to maximize expected revenue. However, the exponential growth of the problem size due to the shelf life of the products makes it impractical to use methods that guarantee optimal solutions, such as Dynamic Programming (DP). Therefore, approximate solution algorithms become necessary. We use Deep Reinforcement Learning (DRL) algorithms to address the dynamic pricing and ordering problem for perishable products, considering price and age-dependent stochastic demand. We investigate Deep Q Learning (DQL) solutions for discrete action spaces and Soft Actor-Critic (SAC) solutions for continuous action spaces. To mitigate the negative impact of the stochastic environment inherent in the problem, we propose two different DQL approaches. Our results show that the proposed DQL and SAC algorithms effectively address inventory control and dynamic pricing for perishable products, even when products of different ages are offered simultaneously. Compared to dynamic programming, our proposed DQL approaches achieve an average approximation of 95.5 % and 96.6 %, and reduce solution times by 71.5 % and 79.9 %, respectively, for the largest problem. In addition, the SAC algorithm achieves on average 4.6 % and 1.7 % better results and completes the task 56.1 % and 48.2 % faster than the proposed DQL algorithms.