Mixed Causal Structure Discovery with Application to Prescriptive Pricing

Mixed Causal Structure Discovery with Application to Prescriptive Pricing

Wei Wenjuan, Feng Lu, Liu Chunchen

Proceedings of the Twenty-Seventh International Joint Conference on Artificial Intelligence
Main track. Pages 5126-5134. https://doi.org/10.24963/ijcai.2018/711

Prescriptive pricing is one of the most advanced pricing techniques, which derives the optimal price strategy to maximize the future profit/revenue by carrying out a two-stage process, demand modeling and price optimization.Demand modeling tries to reveal price-demand laws by discovering causal relationships among demands, prices, and objective factors, which is the foundation of price optimization.Existing methods either use regression or causal learning for uncovering the price-demand relations, but suffer from pain points in either accuracy/efficiency or mixed data type processing, while all of these are actual requirements in practical pricing scenarios.This paper proposes a novel demand modeling technique for practical usage.Speaking concretely, we propose a new locally consistent information criterion named MIC,and derive MIC-based inference algorithms for an accurate recovery of causal structure on mixed factor space.Experiments on simulate/real datasets show the superiority of our new approach in both price-demand law recovery and demand forecasting, as well as show promising performance in supporting optimal pricing.
Keywords:
Uncertainty in AI: Relational Inference
Machine Learning: Interpretability
Machine Learning Applications: Other Applications