Solving a Joint Pricing and Inventory Control Problem for Perishables via Deep Reinforcement Learning

We study a joint pricing and inventory control problem for perishables with positive lead time in a finite horizon periodic‐review system. Unlike most studies considering a continuous density function of demand, in our paper the customer demand depends on the price of current period and arrives according to a homogeneous Poisson process. We consider both backlogging and lost‐sales cases, and our goal is to find a simultaneously ordering and pricing policy to maximize the expected discounted profit over the planning horizon. When there is no fixed ordering cost involved, we design a deep reinforcement learning algorithm to obtain a near‐optimal ordering policy and show that there are some monotonicity properties in the learned policy. We also show that our deep reinforcement learning algorithm achieves a better performance than tabular‐based Q‐learning algorithms. When a fixed ordering cost is involved, we show that our deep reinforcement learning algorithm is effective and efficient, under which the problem of “curse of dimension” is circumvented.