Revenue management, aimed at perishable product revenue optimization, has become an important business strategy for several service industries to increase competence and revenue capabilities. With the quick expansion of E-Business and the development of electronic shelf-labeling systems, revenue management has been well carried out in retailing, for example, since retailers could easily change their prices at minimal cost for different customer segments and collect accurate demand information more conveniently through digital techniques than before. More and more industries are beginning to use innovative pricing techniques to improve inventory control, capacity utilization, and ultimately the profit of the firm. In this paper, we discuss several questions about perishable product revenue management with substitutable demand.First, we address the problem of optimal dynamic pricing of perishable products when demand is substitutable. That is, when a firm sells homogeneous products with different qualities or packages at the same time, demands according to different classes are spilling, based on the prices, inventory on hand and the customers' willing-to-pay. We consider one firm sell two kinds of product at the same time, of which one is old and the other is newly into the market. The methods of revenue management are used to getting optimal pricing policies. We show that the marginal value of the old product is decreasing in both inventory and the selling period left. Furthermore, we find that old product's marginal value will decrease with the entrance of new products into the market. We also apply the theory of maximal concaveenvelope into simplifying the computation process. Numerical examples show that this new policy is more optimal than that of before. The general model incorporating with production and pricing is given at last.Second, we address the problem of the continuous-time inventory control with two-side substitution. Taking airline industry as an example, we propose an analytical model to assist the decision-making process for parallel flights in a monopoly line. Passengers traveling on the same origin-destination pair can choose between two flights run by the same airline. The two flights are scheduled at different time periods of the day. Demand follows a non-homogeneous Poisson process at each price level. Both flights have multiple passenger classes who are price sensitive. Passengers make their purchase decisions based on fares and seat availability. If their preferred flight has no seats available, they may switch to the alternative flight. To optimize expected revenues, the airline integrates seat inventory control on the two flights. We formulate the problem as a continuous-time stochastic control model. Through analyzing the properties of the expected value function, we derive its close-form solution. Specifically, we show that an optimal policy is featured by a sequence of threshold points at which price changes are made. This threshold control policy is simple and easy to implement.Finally, we address the problem of the inventory control policies of perishable products when demand is substitutable between two companies. We assume that two companies sell the homogeneous perishable products in the same market. We demonstrate the existence of pure strategy Nash equilibrium. Furthermore, we find that companies in competitive markets should reserve more products for high-valued customers by comparison with those in the monopoly (alliance) markets.
|