Algorithmic discovery of the Optimal Price

What is the fastest, cheapest and easiest way to estimate the optimal price?

The fastest and easiest way involves automation to stay continuously at the optimal price. An algorithmic approach to maximize profit is called for. The algorithm would follow these steps:

  1. Gather information: about customer price sensitivity through controlled experiments around an initial guess about the price to reduce the impact of noise. These experiments would have to be designed to minimize the loss resulting from pricing sub-optimally given all the available information.
  2. Build a model that forecasts the optimal price. The most basic model only considers price as a factor in consumer choice. This is also the model that can be built with the least amount of data.
  3. Update the guess about the optimal price and start over with step 1.
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