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Pricing and Revenue-Oriented Capacity Allocation

In: Global Supply Chain and Operations Management

Author

Listed:
  • Dmitry Ivanov

    (Berlin School of Economics and Law)

  • Alexander Tsipoulanidis

    (Berlin School of Economics and Law)

  • Jörn Schönberger

    (Technical University of Dresden)

Abstract

This chapter provides a structured introduction to important ideas and procedures of revenue management (RM) with a focus on price determination. The exploration of the opportunities as well as limitations of RM is guided by a comprehensive case study from the transportation sector. After you have successfully worked through this chapter you will be able to answer the following basic question of pricing: How can we determine adequate and customer-specific prices for the products we sell to our customers? Section 17.1 introduces a comprehensive case study from the transportation sector. We discuss methods for the determination of best-selling prices in Sect. 17.2 for situations with sufficient capacity. If the available capacity is scarce and several products and/or customers compete for it, it is necessary to adopt the price setting process (Sect. 17.3). Section 17.4 extends the pricing tools to resource networks if more than one potentially scarce resource is involved in the production of a service or product. Prices are set prior to incoming demand and therefore pricing requires the involvement of demand estimations. If these estimations are inappropriate, the prices will also be. To overcome this methodological shortcoming in pricing, the concept of “Dynamic PricingDynamic Pricing” is proposed which aims to adjust prices reactively to observed market demand. We will introduce Dynamic Pricing in Sect. 17.5. We summarize the main findings from this chapter and outline further issues in RM in Sect. 17.6.

Suggested Citation

  • Dmitry Ivanov & Alexander Tsipoulanidis & Jörn Schönberger, 2019. "Pricing and Revenue-Oriented Capacity Allocation," Springer Texts in Business and Economics, in: Global Supply Chain and Operations Management, edition 2, chapter 17, pages 527-566, Springer.
    • Handle: RePEc:spr:sptchp:978-3-319-94313-8_17
    DOI: 10.1007/978-3-319-94313-8_17
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