Approximation Schemes for Dynamic Pricing with Opaque Products

Abstract: In this paper, we consider a multi-period, multi-product dynamic pricing problem in which each product is endowed with an exogenous starting inventory level, and there is the added complexity of an opaque selling option. That is, alongside traditional (transparent) products, the retailer or platform also has the option to create and price an opaque product, which corresponds to a dummy product comprised potentially of any subset of the displayed transparent products. In the event that a customer selects the opaque product, the platform has the freedom to choose any of the opaque product’s constituents to satisfy this demand. All-in-all, we are left with a classical dynamic pricing problem with a twist, since the addition of the opaque selling option gives the platform an extra lever of flexibility to balance supply and demand