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A Continuous-Time Yield Management Model with Multiple Prices and Reversible Price Changes


  • Youyi Feng

    () (Department of Information System, School of Computing, National University of Singapore, Republic of Singapore 119260)

  • Baichun Xiao

    () (Department of Management, Long Island University, C.W. Post, Brookville, New York 11548)


This article studies a continuous-time yield management model in which reversible price changes are allowed. We assume that perishable assets are offered at a set of discrete price levels. Demand at each level is a Poisson process. To maximize the expected revenue, management controls the price dynamically as sales evolve. We show that a subset of these prices that form a concave envelope is potentially optimal. We formulate the problem into an intensity control model and derive the optimal solution in closed form. Properties of the optimal solution and their policy implementations are discussed. Numerical examples are provided.

Suggested Citation

  • Youyi Feng & Baichun Xiao, 2000. "A Continuous-Time Yield Management Model with Multiple Prices and Reversible Price Changes," Management Science, INFORMS, vol. 46(5), pages 644-657, May.
  • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:5:p:644-657

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    References listed on IDEAS

    1. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    2. Varda Liberman & Uri Yechiali, 1978. "On the Hotel Overbooking Problem--An Inventory System with Stochastic Cancellations," Management Science, INFORMS, vol. 24(11), pages 1117-1126, July.
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