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A Welfare Assessment of Revenue Management Systems

Author

Listed:
  • Dupuis Nicolas

    (Veltys, 32 Rue de Ponthieu, 75008 Paris, France)

  • Ivaldi Marc

    (Toulouse School of Economics, 1 Esplanade de l'Université, 31080 ToulouseCedex 06, France)

  • Pouyet Jerome

    (ESSEC Business School, 3 Avenue Bernard Hirsch, 95000 Cery, France)

Abstract

We study the welfare impact of revenue management, a practice which is widely spread in the transport industry, but whose impact on consumer surplus remains unclear. We develop a theoretical model of revenue management allowing for heterogeneity in product characteristics, capacity constraints, consumer preferences, and probabilities of arrival. We also introduce dynamic competition between revenue managers. We solve this model computationally and recover the optimal pricing strategies. We find that revenue management is generally welfare enhancing as it raises the number of sales.

Suggested Citation

  • Dupuis Nicolas & Ivaldi Marc & Pouyet Jerome, 2020. "A Welfare Assessment of Revenue Management Systems," Review of Network Economics, De Gruyter, vol. 19(1), pages 1-41, March.
    • Handle: RePEc:bpj:rneart:v:19:y:2020:i:1:p:1-41:n:2
    DOI: 10.1515/rne-2020-0038
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    References listed on IDEAS

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    More about this item

    Keywords

    dynamic computational models; intertemporal price discrimination; revenue management; transport fares;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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