Paper Info
Title
Integration of pricing and capacity allocation for perishable products
Abstract
For years pricing and capacity allocation decisions in most revenue management models have been carried out independently. This article presents a comprehensive model to integrate these two decisions for perishable products. We assume that the supplier sells the same products to different micro-markets at distinct prices. Throughout the sales season, the supplier faces decisions as to which micro-markets or customer classes should be served and at what prices. We show that (i) at any time, a customer class is active (being served) if and only if the price offered is over a threshold level, but the optimal price may not be the highest one of the supplier’s choice; (ii) when the price decision is made in conjunction with inventory, it is similar to the procedure shown in pure pricing models, i.e., the optimal price comes from a subset of prices that forms a maximum increasing concave envelope; (iii) because of dynamic changes in the optimal prices, the nested-price structure does not necessarily hold in general and needs to be redefined; and (iv) the optimal pricing and capacity control policy is based on a sequence of threshold points that incorporate inventory, price and demand intensity. Numerical examples are provided.
Year
DOI
Venue
2006
10.1016/j.ejor.2004.04.027
European Journal of Operational Research
Keywords
Field
DocType
Revenue management,Dynamic pricing,Capacity allocation,Stochastic processes,Maximum increasing concave envelope
Revenue,Revenue management,Mathematical optimization,Economics,Optimal control,Dynamic pricing,Microeconomics,Market price,Stochastic process,Resource allocation,Limit price,Operations management
Journal
Volume
Issue
ISSN
168
1
0377-2217
Citations 
PageRank 
References 
22
1.34
17
Authors
2
Name
Order
Citations
PageRank
Youyi Feng116216.40
Baichun Xiao221738.49