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Improving Revenue Management: A Real Option Approach

In: Innovative Quick Response Programs in Logistics and Supply Chain Management

Author

Listed:
  • Wai-Ki Ching
  • Xun Li
  • Tak Kuen Siu

    (Curtin University of Technology)

  • Zhenyu Wu

Abstract

In this article, we apply a real option approach for improving revenue management regarding fluctuating commodity prices and time-varying strike prices in the field of operational research. We also take into account the cyclical nature of commodity prices, which is an important “stylized” fact in the empirical behavior of commodity prices. Two typical examples are provided to illustrate how real options can be used for enhancing profits and managing risk, which are important in revenue management. Valuation of these real options via a semi-analytical algorithm is also discussed.

Suggested Citation

  • Wai-Ki Ching & Xun Li & Tak Kuen Siu & Zhenyu Wu, 2010. "Improving Revenue Management: A Real Option Approach," International Handbooks on Information Systems, in: T. C. Edwin Cheng & Tsan-Ming Choi (ed.), Innovative Quick Response Programs in Logistics and Supply Chain Management, pages 123-139, Springer.
    • Handle: RePEc:spr:ihichp:978-3-642-04313-0_6
    DOI: 10.1007/978-3-642-04313-0_6
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    Cited by:

    1. Chun-Hung Chiu & Shui-Hung Hou & Xun Li & Wei Liu, 2017. "Real options approach for fashionable and perishable products using stock loan with regime switching," Annals of Operations Research, Springer, vol. 257(1), pages 357-377, October.

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