Incremental discount policy for taxi fare with price-sensitive demand
It takes some time for taxi driver to complete a requested service of passengers and the driver can attend to only one service at a time, and this distinguishes taxi service from ordinary goods. This paper deals with an incremental discount policy on the taxi fare. It is assumed that customers arrive following a Poisson process with price-sensitive arrival rates. With the objective of maximizing the average profit of taxi, a mathematical model is developed based on regenerative process. Through an analysis of the model, we show that the incremental discount policy is beneficial to the taxi company when the customer arrival rate is relatively small. Also, we propose a solution procedure to determine the optimal discount rate and price breakpoint. Finally, test problems are solved for sensitivity studies.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hau L. Lee & Meir J. Rosenblatt, 1986. "A Generalized Quantity Discount Pricing Model to Increase Supplier's Profits," Management Science, INFORMS, vol. 32(9), pages 1177-1185, September.
- James P. Monahan, 1984. "A Quantity Discount Pricing Model to Increase Vendor Profits," Management Science, INFORMS, vol. 30(6), pages 720-726, June.
- Sarker, Bhaba R. & Al Kindi, Mahmood, 2006. "Optimal ordering policies in response to a discount offer," International Journal of Production Economics, Elsevier, vol. 100(2), pages 195-211, April.
- Viswanathan, S. & Wang, Qinan, 2003. "Discount pricing decisions in distribution channels with price-sensitive demand," European Journal of Operational Research, Elsevier, vol. 149(3), pages 571-587, September.
- Abad, P. L. & Jaggi, C. K., 2003. "A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive," International Journal of Production Economics, Elsevier, vol. 83(2), pages 115-122, February.
- Robert J. Dolan, 1987. "Quantity Discounts: Managerial Issues and Research Opportunities," Marketing Science, INFORMS, vol. 6(1), pages 1-22.
- Rubin, Paul A. & Benton, W. C., 2003. "Evaluating jointly constrained order quantity complexities for incremental discounts," European Journal of Operational Research, Elsevier, vol. 149(3), pages 557-570, September.
- Burwell, Timothy H. & Dave, Dinesh S. & Fitzpatrick, Kathy E. & Roy, Melvin R., 1997. "Economic lot size model for price-dependent demand under quantity and freight discounts," International Journal of Production Economics, Elsevier, vol. 48(2), pages 141-155, January.
- Munson, Charles L. & Rosenblatt, Meir J. & Rosenblatt, Zehava, 1999. "The use and abuse of power in supply chains," Business Horizons, Elsevier, vol. 42(1), pages 55-65.
- S. K. Goyal, 1987. "Note---Comment on: A Generalized Quantity Discount Pricing Model to Increase Supplier's Profits," Management Science, INFORMS, vol. 33(12), pages 1635-1636, December.
- Wee, Hui-Ming, 1999. "Deteriorating inventory model with quantity discount, pricing and partial backordering," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 511-518, March.
- Kim, Kap H. & Hwang, Hark, 1988. "An incremental discount pricing schedule with multiple customers and single price break," European Journal of Operational Research, Elsevier, vol. 35(1), pages 71-79, April.
- Polatoglu, Hakan & Sahin, Izzet, 2000. "Optimal procurement policies under price-dependent demand," International Journal of Production Economics, Elsevier, vol. 65(2), pages 141-171, April.
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:112:y:2008:i:2:p:895-902. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.