A Continuous-Time Yield Management Model with Multiple Prices and Reversible Price Changes

Youyi Feng () and Baichun Xiao ()
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Youyi Feng: Department of Information System, School of Computing, National University of Singapore, Republic of Singapore 119260
Baichun Xiao: Department of Management, Long Island University, C.W. Post, Brookville, New York 11548

Management Science, 2000, vol. 46, issue 5, 644-657

Abstract: This article studies a continuous-time yield management model in which reversible price changes are allowed. We assume that perishable assets are offered at a set of discrete price levels. Demand at each level is a Poisson process. To maximize the expected revenue, management controls the price dynamically as sales evolve. We show that a subset of these prices that form a concave envelope is potentially optimal. We formulate the problem into an intensity control model and derive the optimal solution in closed form. Properties of the optimal solution and their policy implementations are discussed. Numerical examples are provided.

Keywords: yield management; optimal switching time; poisson demand; monotonicity (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (60)

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