System and Method for Tuning Demand Coefficients
First Claim
1. A method for tuning demand coefficients for a first product category, useful in association with a pricing optimization system, the method comprising:
- receiving data from at least one store, wherein the data includes transactions associated with at least one product category;
selecting price elasticity and uncertainty values from at least one of the at least one product category;
estimating tuning parameters for the first product category, wherein the tuning parameters include price elasticity mean and price elasticity standard deviation, and wherein estimating the tuning parameters uses the selected price elasticity and uncertainty values;
generating a modified likelihood function by applying a normally distributed price elasticity term; and
generating tuned demand coefficients by maximizing the modified likelihood function.
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Abstract
The present invention relates to a system and method for tuning demand coefficients. Transaction data for product categories is received from a store(s). Price elasticity and uncertainty values are selected for the product categories. This transaction data may be seeded with generic price elasticity and uncertainty values. Product categories where the transaction history is not sufficient enough to generate accurate demand coefficients may be identified. Tuning parameters for a product category are estimated using price elasticity and uncertainty values. The tuning parameters include price elasticity mean and price elasticity standard deviation. A modified likelihood function is generated by applying a normally distributed price elasticity term. The modified likelihood function may then be solved for its maxima, thereby generating tuned demand coefficients which may be output to a pricing optimization system for product price setting, and/or may be stored for later product categories. New sales data may be received from the store(s). This data may be used to retrain the tuned demand coefficients.
115 Citations
20 Claims
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1. A method for tuning demand coefficients for a first product category, useful in association with a pricing optimization system, the method comprising:
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receiving data from at least one store, wherein the data includes transactions associated with at least one product category; selecting price elasticity and uncertainty values from at least one of the at least one product category; estimating tuning parameters for the first product category, wherein the tuning parameters include price elasticity mean and price elasticity standard deviation, and wherein estimating the tuning parameters uses the selected price elasticity and uncertainty values; generating a modified likelihood function by applying a normally distributed price elasticity term; and generating tuned demand coefficients by maximizing the modified likelihood function. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10)
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11. A demand coefficient tuner for a first product category, useful in association with a pricing optimization system, the demand coefficient tuner comprising:
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an input configured to receive data from at least one store, wherein the data includes transactions associated with at least one product category; a category selector configured to select price elasticity and uncertainty values from at least one of the at least one product category; a tuning parameter estimator configured to estimate tuning parameters for the first product category, wherein the tuning parameters include price elasticity mean and price elasticity standard deviation, and wherein estimating the tuning parameters uses the selected price elasticity and uncertainty values; a function modifier configured to generate a modified likelihood function by applying a normally distributed price elasticity term; and a coefficient generator configured to generate tuned demand coefficients by maximizing the modified likelihood function. - View Dependent Claims (12, 13, 14, 15, 16, 17, 18, 19, 20)
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Specification