A Dynamic Pricing Model For Airline Revenue Management With Competition

Due to the perishable attribute of flight seats inventory and fixed capacity, pricing has become the most effective tool to induce demand with the object to maximize total revenue. Taking this as a major research topic, dynamic pricing studies in revenue management focused on exploring monopoly pricing models, ignore the facts that there are often several flights on a route competing with each other. And, with the development of E-tickets and information search technology, significantly reducing the cost for a customer to collect and compare airlines price information, n such market conditions, if airlines continue to use revenue management dynamic pricing model based on the assumption of monopoly, it is difficult to achieve the desired effects. For theoretical shortcomings and practical needs, this paper built a dynamic pricing model to consider competitive factors.First, we improved a single flight dynamic pricing model. Different from the traditional dynamic pricing models which take price set as decision variables, this model directly take time threshold point of price change as a decision-making variables to express the relationship of price decision and value function more clearly. This make it possible for us to describe the impact of the change of other opponent's price on own expected value.Then, base on the single flight model, we dynamically described the whole sales process from the details of every tick's transaction. We developed a continuous time dynamic pricing model, with two competition flights, each with two price levels.Finally, in the form of numerical case, we displayed the procedures to apply our model practically. By analysis model outputs we get some reasonable conclusions. By compare the equilibrium strategy with other two strategies, we found that the...