Optimal Pricing Policies for Perishable Products

In many industrial settings, managers face the problem of establishing a pricing policy that maximizes the revenue from selling a given inventory of items by a fixed deadline, with the full inventory of items being available for sale from the beginning of the selling period. This problem arises in a variety of industries, including the sale of fashion garments, flight seats, and hotel rooms. We present a family of continuous pricing functions for which the optimal pricing strategy can be explicitly characterized and easily implemented. These pricing functions are the basis for a general pricing methodology which is particularly well suited for application in the context of an increasing role for the Internet as a means to market goods and services.


European Journal of Operational Research, Vol 166/1, 2005, 246-254.