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Product line pricing for services with capacity constraints and dynamic substitution


  • Burkart, Wolfgang R.
  • Klein, Robert
  • Mayer, Stefan


In this paper, we address a service provider’s product line pricing problem for substitutable products in services, such as concerts, sporting events, or online advertisements. For each product, a static price is selected from a pre-defined set such that the total revenue is maximised. The products are differentiated by some of their attributes, and their availability is restricted due to individual capacity constraints. Furthermore, they are simultaneously sold during a common selling period at the end of which the service is delivered. Consumers differ from one another with respect to their willingness to pay, and, hence, their reservation prices vary depending on the product. In the event of a purchase, they choose the product that maximises their consumer surplus.

Suggested Citation

  • Burkart, Wolfgang R. & Klein, Robert & Mayer, Stefan, 2012. "Product line pricing for services with capacity constraints and dynamic substitution," European Journal of Operational Research, Elsevier, vol. 219(2), pages 347-359.
  • Handle: RePEc:eee:ejores:v:219:y:2012:i:2:p:347-359 DOI: 10.1016/j.ejor.2011.12.026

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    References listed on IDEAS

    1. Kraus, Ursula G. & Yano, Candace Arai, 2003. "Product line selection and pricing under a share-of-surplus choice model," European Journal of Operational Research, Elsevier, vol. 150(3), pages 653-671, November.
    2. Moreno Perez, Jose A. & Marcos Moreno-Vega, J. & Rodriguez Martin, Inmaculada, 2003. "Variable neighborhood tabu search and its application to the median cycle problem," European Journal of Operational Research, Elsevier, vol. 151(2), pages 365-378, December.
    3. Gregory Dobson & Shlomo Kalish, 1988. "Positioning and Pricing a Product Line," Marketing Science, INFORMS, vol. 7(2), pages 107-125.
    4. Day, Jamison M. & Venkataramanan, M.A., 2006. "Profitability in product line pricing and composition with manufacturing commonalities," European Journal of Operational Research, Elsevier, vol. 175(3), pages 1782-1797, December.
    5. Kyle D. Chen & Warren H. Hausman, 2000. "Technical Note: Mathematical Properties of the Optimal Product Line Selection Problem Using Choice-Based Conjoint Analysis," Management Science, INFORMS, vol. 46(2), pages 327-332, February.
    6. Constantinos Maglaras & Joern Meissner, 2006. "Dynamic Pricing Strategies for Multiproduct Revenue Management Problems," Manufacturing & Service Operations Management, INFORMS, vol. 8(2), pages 136-148, July.
    7. Lingxiu Dong & Panos Kouvelis & Zhongjun Tian, 2009. "Dynamic Pricing and Inventory Control of Substitute Products," Manufacturing & Service Operations Management, INFORMS, vol. 11(2), pages 317-339, December.
    8. Paul E. Green & Abba M. Krieger, 1985. "Models and Heuristics for Product Line Selection," Marketing Science, INFORMS, vol. 4(1), pages 1-19.
    9. Ward Hanson & Kipp Martin, 1996. "Optimizing Multinomial Logit Profit Functions," Management Science, INFORMS, vol. 42(7), pages 992-1003, July.
    10. Gregory Dobson & Shlomo Kalish, 1993. "Heuristics for Pricing and Positioning a Product-Line Using Conjoint and Cost Data," Management Science, INFORMS, vol. 39(2), pages 160-175, February.
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    Cited by:

    1. Mayer, Stefan & Klein, Robert & Seiermann, Stephanie, 2013. "A simulation-based approach to price optimisation of the mixed bundling problem with capacity constraints," International Journal of Production Economics, Elsevier, vol. 145(2), pages 584-598.
    2. Mayer, Stefan & Steinhardt, Claudius, 2016. "Optimal product line pricing in the presence of budget-constrained consumers," European Journal of Operational Research, Elsevier, vol. 248(1), pages 219-233.
    3. Shin, Hojung & Park, Soohoon & Lee, Euncheol & Benton, W.C., 2015. "A classification of the literature on the planning of substitutable products," European Journal of Operational Research, Elsevier, vol. 246(3), pages 686-699.
    4. repec:eee:ejores:v:262:y:2017:i:1:p:207-216 is not listed on IDEAS
    5. repec:exl:25engi:v:27:y:2016:i:5:p:546-556 is not listed on IDEAS
    6. Ahmed Ghoniem & Bacel Maddah & Ameera Ibrahim, 2016. "Optimizing assortment and pricing of multiple retail categories with cross-selling," Journal of Global Optimization, Springer, vol. 66(2), pages 291-309, October.


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