The Research Of Dynamic Pricing For Airline Parallel Flights

Recent years, with the more and more perfect of China's market economy and the rapid and sustaining development of economy, Chinese Civil Aviation Passenger Transport has got the high-speed advance. However, confronted with the strong challenges from other transportation methods at home and heated competition with airlines abroad, laggard management mechanism and methods have put domestic airlines into a disadvantageous position.As an indispensable means to increase revenue and participate in market competition in the modern airlines, Revenue Management has already created enormous miracles in overseas airlines. Revenue Management emphasizes the use of dynamic pricing and inventory control to realize the maximum revenue of company by market segmentation and consumer behavior analysis. Its core thought is to sell the right product to the right consumer at the right time of the right price.Revenue management coming from the civil aviation has not only aquired a great of effect in practice but also a voluminous literature has also come forth in the theoretical fields. However, the majority of this literature focuses on the model for a single flight. Actually, the airlines usually provide multiple flights (called the parallel flights generally) between a common origin and destination to satisfy the demands of different passengers, such as Air China Southwest Company provides eleven parallel flights everyday for the leg from Chengdu to Beijing. Furthermore, there are usually several airlines to run in the same leg and the competitions are also very fierce mutually. But so far, there are just a few researches concerning this kind of phenomenon of the parallel flights and how synthesize to draw up its dynamic pricing strategy for revenue management to maximize the revenue. In this dissertation, we discuss the policy of dynamic pricing of multiple parallel flights under the monopolistic and competitive market environment. It has important theoretical significance and practical values to research the problem. The main research contents are as follows:Firstly, we address the situation where the China Airlines practice thepolicy of dynamic pricing. We conduct the empirical analysis of sales and price data from the domestic airlines. We select multiple parallel flights in two legs that have the relative monopolistic and competitive characteristic to analyze the demand and pricing strategy, then point out the phenomenon that parallel flights have an impact mutually in practice, and analyze the existent problem of the actual dynamic pricing strategy.Secondly, we build up the dynamic pricing model for two parallel flights based on substitute demand in monopolistic or imperfectly competitive market with the stochastic control theory, prove the property of the value function and give threshold point of time of optimum control, whose control strategy is simple as well as being prone to implement. Numerical examples show that this new policy is more optimal than that ofbefore.Thirdly, we discuss the dynamic pricing strategy for two parallel flights provided by two airlines under duopoly market environment. With the non-cooperative game theory, we analyze the static game theory model of pricing under the competitive environment, and prove that a unique pure Nash equilibrium solution exists. Further, applying the stochastic control theory and differential game, we discuss the dynamic pricing strategy in competitive market, get the optimum solution, and compare the revenue in competitive market with the revenue in monopolistic market. The conclusion indicates that under the competitive market environment, the airlines should draw up a low pricing strategy to gain more revenue.Finally, we combine the theories analysis and practice circumstance, put forward the countermeasure and suggestion of parallel flights' dynamic pricing of Air China and propose some potential future research directions.