Learning competitive pricing strategies by multi-agent reinforcement learning

In electronic marketplaces automated and dynamic pricing is becoming increasingly popular. Agents that perform this task can improve themselves by learning from past observations, possibly using reinforcement learning techniques. Co-learning of several adaptive agents against each other may lead to unforeseen results and increasingly dynamic behavior of the market. In this article we shed some light on price developments arising from a simple price adaptation strategy. Furthermore, we examine several adaptive pricing strategies and their learning behavior in a co-learning scenario with different levels of competition. Q-learning manages to learn best-reply strategies well, but is expensive to train. (C) 2002 Elsevier Science B.V. All rights reserved.