Dynamic Pricing Strategies for Multi-Product Revenue Management Problems

19 Pages Posted: 30 Aug 2011

See all articles by Costis Maglaras

Costis Maglaras

Columbia University - Columbia Business School, Decision Risk and Operations

Date Written: May 7, 2009

Abstract

This chapter reviews multi-product dynamic pricing models for a revenue maximizing monopolist firm. The baseline model studied in this chapter 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 chapter 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.

Keywords: revenue management, dynamic pricing, fluid approximations, multi-product, capacity controls

Suggested Citation

Maglaras, Costis, Dynamic Pricing Strategies for Multi-Product Revenue Management Problems (May 7, 2009). Columbia Business School Research Paper , Available at SSRN: https://ssrn.com/abstract=1919184 or http://dx.doi.org/10.2139/ssrn.1919184

Costis Maglaras (Contact Author)

Columbia University - Columbia Business School, Decision Risk and Operations ( email )

New York, NY
United States

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