An airline revenue management pricing game with seat allocation

Asif Syed Raza and Ali Akgunduz

International Journal of Revenue Management, 2008, vol. 2, issue 1, 42-62

Abstract: This paper studies a horizontal fare-pricing competition between two airlines having a single flight leg. Two distinct scenarios are considered. First, the two airlines price competition for the pre-committed booking limits is analysed. The problem is studied under deterministic price sensitive demands. The existence of unique pricing strategies at Nash equilibrium is shown. In the second scenario, a joint seat allocation and fare-pricing competition model for stochastic demand is proposed. A numerical analysis is presented to demonstrate the impacts of various market conditions on the payoffs, booking limits and pricing strategies of the competing airlines.

Keywords: airline revenue management; game theory; Nash equilibrium; seat inventory control; fare pricing competition; price sensitive demands; pricing strategies; booking limits. (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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