APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY Appl. Stochastic Models Bus. Ind. 2010; 26:758–774 Published online 8 December 2009 in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/asmb.816 Dynamic pricing model and algorithm for perishable products with fuzzy demand Yu Xiong 1 , Gendao Li 2, ∗, † and Kiran Jude Fernandes 3 1 Queen’s University Management School, 25 University Square, Belfast, BT7 1NN, U.K. 2 School of Management, Jilin University, Renmin Ave, Changchun, People’s Republic of China 3 The York Management School, University of York, York YO10 5DD, U.K. SUMMARY This paper studies the dynamic pricing problem of selling fixed stock of perishable items over a finite horizon, where the decision maker does not have the necessary historic data to estimate the distribution of uncertain demand, but has imprecise information about the quantity demand. We model this uncertainty using fuzzy variables. The dynamic pricing problem based on credibility theory is formulated using three fuzzy programming models, viz.: the fuzzy expected revenue maximization model, -optimistic revenue maximization model, and credibility maximization model. Fuzzy simulations for functions with fuzzy parameters are given and embedded into a genetic algorithm to design a hybrid intelligent algorithm to solve these three models. Finally, a real-world example is presented to highlight the effectiveness of the developed model and algorithm. Copyright 2009 John Wiley & Sons, Ltd. Received 10 November 2008; Revised 11 September 2009; Accepted 11 September 2009 KEY WORDS: dynamic pricing; revenue management; credibility theory; fuzzy programming; fuzzy simulation; genetic algorithm 1. INTRODUCTION The growth in the adoption of the internet in marketing has been revolutionary in the last decade [1]. The first wave of growth in the web was in the business-to-consumer domain, where the internet was utilized to enhance the efficiency of processes through a dramatic reduction in the exchange ∗ Correspondence to: Gendao Li, School of Management, Jilin University, Renmin Ave, Changchun, People’s Republic of China. † E-mail: ligendao@jlu.edu.cn Contract/grant sponsor: National Science Foundation of China; contract/grant number: 70571088 Contract/grant sponsor: National Social Science Foundation of China; contract/grant number: 02cjy027 Contract/grant sponsor: Natural Science Foundation Project of CQ CSTC; contract/grant number: cstc.2006BB0188 Contract/grant sponsor: Engineering and Physical Sciences Research Council; contract/grant number: EP/F016905/1 Copyright 2009 John Wiley & Sons, Ltd.