Estimating the Gains (and Losses) of Revenue Management

D’Haultfoeuille, Xavier, Ao Wang, Philippe Février and Lionel Wilner
Additional contact information
D’Haultfoeuille, Xavier: CREST-ENSAE
Ao Wang: University of Warwick and CAGE
Philippe Février: CREST
Authors registered in the RePEc Author Service: Xavier D'Haultfoeuille

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Despite the wide adoption of revenue management in many industries such as airline, railway, and hospitality, there is still scarce empirical evidence on the gains or losses of such strategies compared to uniform pricing or fully flexible strategies. We quantify such gains and losses and identify their underlying sources in the context of French railway transportation. The identification of demand is complicated by censoring and the absence of exogenous price variations. We develop an original identification strategy combining temporal variations in relative prices, consumers’ rationality and weak optimality conditions on the firm’s pricing strategy. Our results suggest similar or better performance of the actual revenue management compared to optimal uniform pricing, but also substantial losses of up to 16.2% compared to the optimal pricing strategy. We also highlight the key role of revenue management in acquiring information when demand is uncertain.

Keywords: Revenue management; dynamic pricing; demand estimation; demand learning; moment inequalities JEL Codes: C25; C61; D12; R40 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com and nep-reg
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https://warwick.ac.uk/fac/soc/economics/research/w ... werp_1412_-_wang.pdf

Related works:
Working Paper: Estimating the Gains (and Losses) of Revenue Management (2024)
Working Paper: Estimating the Gains (and Losses) of Revenue Management (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1412

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