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Management Science Vol. 46 No. 5 2000

A Continuous-Time Yield Management Model with Multiple Prices and Reversible Price Changes

Youyi Feng1; Baichun Xiao2

1 Department of Information System, School of Computing, National University of Singapore, Republic of Singapore 119260 · 2 Department of Management, Long Island University, C.W. Post, Brookville, New York 11548

Abstract

This article studies a continuous-time yield management model in which reversible price changes are allowed. We assume that perishable assets are offered at a set of discrete price levels. Demand at each level is a Poisson process. To maximize the expected revenue, management controls the price dynamically as sales evolve. We show that a subset of these prices that form a concave envelope is potentially optimal. We formulate the problem into an intensity control model and derive the optimal solution in closed form. Properties of the optimal solution and their policy implementations are discussed. Numerical examples are provided.

DOI
10.1287/mnsc.46.5.644.12050
Volume
46
Issue
5
Pages
644-657
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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