Joint Decision-making Of Pricing And Seat Inventory Control Under Competition

In recent years,the speed of development of air transportation in our country has been slowing down.The increase in aviation fuel price has further led to the reduction in airlines' profit.More airlines are built and then the competition is more intense.Therefore,it is significant for airlines to study the joint decision-making of pricing and seat inventory control under competition.Firstly,the market concentration rate is used as an indicator to analyze the market of air transportation.Then,due to the uncertainty of the demand,Bowley's model is used to predict the demand.Assuming that the real demand is Lipschitz continuous,a new model is proposed to estimate demand parameters using historical data,and the corresponding pricing optimization approach is presented in order to maximize airlines' revenue.With more available information,the substitution rate is specifically described,and an improved pricing model with spill-over demand is built.The effects of competitive factors and price sensitivity coefficients on airlines' pricing strategies are analyzed by examples.On the basis of proposed demand model and pricing optimization model,for two fare classes,a joint game model of pricing and seat inventory control is built.In this model,service quality competition,the refund rate,as well as the spill-over demand from the competitor are all taken into consideration.Next,the vertical slice theorem is used to prove the existence of the Nash equilibrium.If the game is symmetric,the uniqueness of the pure strategy Nash equilibrium can be demonstrated.According to an actual case,the equilibrium is solved by using MATLAB.Finally,the effects of market parameters,service quality and the refund rate on the equilibrium are analyzed through numerical experiments,and some suggestions are provided for airlines.