Mathematical Modelling for Dynamic Pricing and Discount Strategies

Student: ESTHER OLAMIDE OSINBANJO (Project, 2025)
Department of Pure and Applied Mathematics
Federal University of Agriculture, Abeokuta, Ogun State

Abstract

ABSTRACT This project focuses on the development of a mathematical model for optimizing dynamic pricing and discount strategies in the grocery beverage sector. The model aims to maximize revenue by dynamically adjusting prices and discounts in response to changing demand and market conditions. The demand function, Q(P, δ) = β0 −β1P +β2δ, models the relationship between demand quantity Q and price P, incorporating the influence of discount rates δ. Dynamic pricing is modeled by P(t) = P0 + α × (Q(t) − Q0) where P0 is the initial price, α is a sensitivity coefficient, Q(t) is the demand at time t, and Q0 is the initial demand. This model integrates dynamic pricing with discount strategies, leveraging demand elasticity and time-based factors to strike a balance between stimulating demand and maintaining profit margins. The approach provides a robust framework for grocery retailers to optimize pricing decisions, thereby enhancing competitiveness in a rapidly evolving market. The results of this study are expected to offer actionable insights into the effective application of mathematical modeling in pricing and discount optimization.

Keywords
Dynamic Pricing Discount Strategies Mathematical Modeling Revenue Optimization Price Elasticity Demand Function Dynamic Programming Bellman's Equation Grocery Beverage Sector Pricing Decisions
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