Self-learning Agents for Recommerce Markets

Abstract

AbstractNowadays, customers as well as retailers look for increased sustainability. Recommerce markets – which offer the opportunity to trade-in and resell used products – are constantly growing and help to use resources more efficiently. To manage the additional prices for the trade-in and the resale of used product versions challenges retailers as substitution and cannibalization effects have to be taken into account. An unknown customer behavior as well as competition with other merchants regarding both sales and buying back resources further increases the problem’s complexity. Reinforcement learning (RL) algorithms offer the potential to deal with such tasks. However, before being applied in practice, self-learning algorithms need to be tested synthetically to examine whether they and which work in different market scenarios. In the paper, the authors evaluate and compare different state-of-the-art RL algorithms within a recommerce market simulation framework. They find that RL agents outperform rule-based benchmark strategies in duopoly and oligopoly scenarios. Further, the authors investigate the competition between RL agents via self-play and study how performance results are affected if more or less information is observable (cf. state components). Using an ablation study, they test the influence of various model parameters and infer managerial insights. Finally, to be able to apply self-learning agents in practice, the authors show how to calibrate synthetic test environments from observable data to be used for effective pre-training.