Balancing Immediate Revenue and Future Off-Policy Evaluation in Coupon Allocation

• URL: http://arxiv.org/abs/2407.11039v3
• Date: Sun, 8 Sep 2024 23:10:59 GMT
• Title: Balancing Immediate Revenue and Future Off-Policy Evaluation in Coupon Allocation
• Abstract summary: We propose a novel approach that combines a model-based revenue policy and a randomized exploration policy for data collection. Our framework enables flexible adjustment of the mixture ratio between these two policies to optimize the balance between short-term revenue and future policy improvement. We empirically verified the effectiveness of the proposed mixed policy using synthetic data.
• Score: 3.4562366784858685
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: Coupon allocation drives customer purchases and boosts revenue. However, it presents a fundamental trade-off between exploiting the current optimal policy to maximize immediate revenue and exploring alternative policies to collect data for future policy improvement via off-policy evaluation (OPE). To balance this trade-off, we propose a novel approach that combines a model-based revenue maximization policy and a randomized exploration policy for data collection. Our framework enables flexible adjustment of the mixture ratio between these two policies to optimize the balance between short-term revenue and future policy improvement. We formulate the problem of determining the optimal mixture ratio as multi-objective optimization, enabling quantitative evaluation of this trade-off. We empirically verified the effectiveness of the proposed mixed policy using synthetic data. Our main contributions are: (1) Demonstrating a mixed policy combining deterministic and probabilistic policies, flexibly adjusting the data collection vs. revenue trade-off. (2) Formulating the optimal mixture ratio problem as multi-objective optimization, enabling quantitative evaluation of this trade-off.

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