We present a computational approach that autonomous software agents can adopt to make tactical decisions, such as product pricing, and strategic decisions, such as product mix and production planning, to maximize profit in markets with supply and demand uncertainties. Using a combination of machine learning and optimization techniques, the agent is able to characterize economic regimes, which are historical microeconomic conditions reflecting situations such as over-supply and scarcity. We assume an agent is capable of using real-time observable information to identify the current dominant market condition and we show how it can forecast regime changes over a planning horizon. We demonstrate how the agent can then use regime characterization to predict prices, price trends, and the probability of receiving a customer order in a dynamic supply chain environment. We validate our methods by presenting experimental results from a testbed derived from the Trading Agent Competition for Supply Chain Management (TAC SCM). The results show that our agent outperforms traditional short- and long-term predictive methodologies (such as exponential smoothing) significantly, resulting in accurate prediction of customer order probabilities, and competitive market prices. This, in turn, has the potential to produce higher profits. We also demonstrate the versatility of our computational approach by applying the methodology to prediction of stock price trends.

agent-mediated electronic commerce, dynamic pricing, machine learning, market forecasting, rational decision making
Computational Techniques; Simulation Modelling (jel C63), Information and Product Quality; Standardization and Compatibility (jel L15), Business Administration and Business Economics; Marketing; Accounting (jel M), Management of Technological Innovation and R&D (jel O32)
Erasmus Research Institute of Management
hdl.handle.net/1765/13547
ERIM Report Series Research in Management
ERIM report series research in management Erasmus Research Institute of Management
Erasmus Research Institute of Management

Ketter, W, Collins, J, Gini, M, Gupta, A, & Schrater, P. (2008). Tactical and Strategic Sales Management for Intelligent Agents Guided By Economic Regimes (No. ERS-2008-061-LIS). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/13547