Dynamic Pricing Strategies for Multiproduct Revenue Management Problems
Constantinos Maglaras () and
Additional contact information
Constantinos Maglaras: Columbia Business School, Columbia University, 409 Uris Hall, 3022 Broadway, New York, New York 10027
Manufacturing & Service Operations Management, 2006, vol. 8, issue 2, 136-148
Consider a firm that owns a fixed capacity of a resource that is consumed in the production or delivery of multiple products. The firm strives to maximize its total expected revenues over a finite horizon, either by choosing a dynamic pricing strategy for each product or, if prices are fixed, by selecting a dynamic rule that controls the allocation of capacity to requests for the different products. This paper shows how these well-studied revenue management problems can be reduced to a common formulation in which the firm controls the aggregate rate at which all products jointly consume resource capacity, highlighting their common structure, and in some cases leading to algorithmic simplifications through the reduction in the control dimension of the associated optimization problems. In the context of their associated deterministic (fluid) formulations, this reduction leads to a closed-form characterization of the optimal controls, and suggests several natural static and dynamic pricing heuristics. These are analyzed asymptotically and through an extensive numerical study. In the context of the former, we show that "resolving" the fluid heuristic achieves asymptotically optimal performance under fluid scaling.
Keywords: revenue management; dynamic pricing; capacity controls; fluid approximations; efficient frontier (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53) Track citations by RSS feed
Downloads: (external link)
Working Paper: Dynamic Pricing Strategies for Multi-Product Revenue Management Problems (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:8:y:2006:i:2:p:136-148
Access Statistics for this article
More articles in Manufacturing & Service Operations Management from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Walls ().