Pricing with uncertain customer valuations

Uncertain demand in pricing problems is often modeled using the sum of a linear price-response function and a zero-mean random variable. In this paper, we argue that the presence of uncertainty motivates the introduction of nonlinearities in the demand as a function of price, both in the risk-neutral and risk-sensitive models. We motivate our analysis … Read more

A polyhedral study of the Network Pricing Problem with Connected Toll Arcs

Consider the problem that consists in maximizing the revenue generated by tolls set on a subset of arcs of a transportation network, and where origin-destination flows are assigned to shortest paths with respect to the sum of tolls and initial costs. In this work, we address the instance where toll arcs must be connected, as … Read more

Single-Product Pricing via Robust Optimization

We present a robust optimization approach to the problem of pricing a capacitated product over a finite time horizon in the presence of demand uncertainty. This technique does not require the knowledge of the underlying probability distributions, which in practice are difficult to estimate accurately, and instead models random variables as uncertain parameters belonging to … Read more

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 … Read more

Maximising Revenue in the Airline Industry Under One-Way Pricing

This paper describes a methodology that has been implemented in a major British airline to find the optimal price to charge for airline tickets under one-way pricing. An analytical model has been developed to describe the buying behaviour of customers for flights over the selling period. Using this model and a standard analytical method for … Read more

A Class of Hybrid Methods for Revenue Management

We consider a Markov decision process model of a network revenue management problem. Working within this formal framework, we study policies that combine aspects of mathematical programming approaches and pure Markov decision process methods. The policies employ heuristics early in the booking horizon, and switch to a more-detailed decision rule closer to the time of … Read more