AI in Price Optimization and Dynamic Pricing Quiz

Answers and explanations appear as you take the quiz.

1. What is 'price elasticity' that these models try to learn?
   • How sensitive customer demand is to changes in price
   • How stretchy a product's packaging is
   • The maximum legal price for a product
   • How quickly prices can be displayed on a website
2. What is the difference between price optimization and dynamic pricing?
   • They are exactly the same thing
   • Optimization finds a good price; dynamic pricing keeps adjusting it as conditions change
   • Dynamic pricing is illegal but optimization is not
   • Optimization only applies to physical stores
3. Why are reinforcement learning or multi-armed bandit methods used in dynamic pricing?
   • To eliminate the need for any sales data
   • To guarantee prices never change
   • To balance exploring new price points against exploiting prices known to work
   • To translate prices into other currencies
4. Which pricing feature does Uber describe as responding to more riders than available drivers in an area?
   • A fixed price that never changes by location
   • A fare set only by the driver after the trip
   • A coupon applied to every ride
   • Surge pricing that may raise fares during high demand
5. What kind of constraints are typically layered onto a pricing optimizer?
   • Minimum margins, legal limits, and brand consistency rules
   • The color of the product packaging
   • The CEO's favorite numbers
   • Only the current weather
6. What is a major risk of aggressive AI dynamic pricing?
   • Prices becoming permanently fixed
   • Customer backlash and accusations of price gouging or unfair discrimination
   • Products selling out too slowly forever
   • The website loading faster than intended
7. After estimating demand at candidate prices, what does a price optimizer compare to choose a price?
   • The product’s image resolution at each price
   • The number of training examples in the pricing model
   • The predicted business objective, such as revenue or profit, at each candidate price
   • The text length of each customer review
8. Besides price, what inventory signal may influence demand in a dynamic-pricing model?
   • The font used on the product page
   • The operating system of the pricing server
   • The color of a warehouse employee’s uniform
   • The stock level available to customers