Dynamic Pricing Method Research Onpremium Economy Class

Premium economy class is an intermediate class between economy class and business class. It is the product of market segmentation. As a kind of different means of competition, it can help airlines to attract corresponding market segmentation consumers. Premium economy class passengers are mainly business travelers, who have low price sensitivity and pursue comfortable environment on the aircraft. However, they do not tend to take business class because of the ticket reimbursement system. In addition, airlines set up the premium economy class not only to increase revenue, but also to cultivate Frequent Fliers.On the basis of fully research on premium economy class and passenger groups characteristics, this paper sets up two premium economy class dynamic pricing models of different passenger demand functions with the combination of differential pricing and dynamic pricing theories. The first demand, derived from consumer utility function, aims at maximum profit. By considering the purchase probability of the passengers, it sets up and solves the dynamic pricing model, and verifies the model with relevant data. In the second model, this paper assumes that demand function is given, such as exponential function, linear function and logit function, which is only related to the current price. Consequently, the ticket price varies with the remaining seats and the remaining time. This method acquires an approximate value based on the optimal expected revenue function thus getting the optimal ticket prices of the premium economy class.The example analysis is based on the two dynamic pricing models of premium economy class above; results show that dynamic pricing method can increase the revenue of premium economy class. The dynamic pricing methods have much effect on the total revenue; it can make the expected revenue almost reach the optimal. Therefore, on the basis of reasonable passenger demand forecasts, dynamic pricing should be a better choice to raise revenue.