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Dynamic Pricing Strategies for Multiproduct Revenue Management Problems

This is a research report on Dynamic Pricing Strategies for Multiproduct Revenue Management Problems uploaded by Ayesha Shaikh in category: All Documents »  Marketing »  Marketing Management section of our research repository.
754 views, 0 comments, Last Update: May 10, 2015.

Tags: INTRODUCTION , Single Resource , Multiproduct Model , Analysis ofthe Pricing and Capacity Control Problems , Analysis ofthe Pricing Problem Using Its Fluid Approximation
Consider a firm that owns a fixed capacity of a resource that is consumed in the production or delivery of
multiple products. The firm strives to maximize its total expected revenues over a finite horizon, either
by choosing a dynamic pricing strategy for each product or, if prices are fixed, by selecting a dynamic rule
that controls the allocation of capacity to requests for the different products. This paper shows how these wellstudied
revenue management problems can be reduced to a common formulation in which the firm controls
the aggregate rate at which all products jointly consume resource capacity, highlighting their common structure,
and in some cases leading to algorithmic simplifications through the reduction in the control dimension of
the associated optimization problems. In the context of their associated deterministic (fluid) formulations, this
reduction leads to a closed-form characterization of the optimal controls, and suggests several natural static and
dynamic pricing heuristics. These are analyzed asymptotically and through an extensive numerical study. In the
context of the former, we show that “resolving” the fluid heuristic achieves asymptotically optimal performance
under fluid scaling.


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