Costis Maglaras

“Dynamic pricing strategies for multi-product revenue management problems”

Abstract:
This chapter reviews multiproduct dynamic pricing models for a revenue maximizing monopolist firm. The baseline model studied in this article is of a seller that owns a fixed capacity of a resource that is consumed in the production or delivery of some type of product. The seller selects a dynamic pricing strategy for the offered product so as to maximize its total expected revenues over a finite time horizon. We then review how this model can be extended to settings where the firm is selling multiple products that consume this firm's capacity, and finally highlight a connection between these dynamic pricing models and the closely related model where prices are fixed, and the seller dynamically controls how to allocate capacity to requests for the different products. Methodologically, this article reviews the dynamic programming formulations of the above problems, as well as their associated deterministic (fluid) analogues. It highlights some of the key insights and pricing heuristics that are known for these problems, and briefly mentions possible extensions and areas of current interest.

Source: Wiley Encyclopedia of Operations Research and Management
Exact Citation:
Maglaras, Costis. "Dynamic pricing strategies for multi-product revenue management problems." In Wiley Encyclopedia of Operations Research and Management. Hoboken, NJ: Wiley, 2010.
Place: Hoboken, NJ
Date: 2010