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A Welfare Assessment of Revenue Management Systems

Author

Listed:
  • Nicolas Dupuis
  • Marc Ivaldi

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Jerome Pouyet

    (ESSEC Business School, THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract

We study the welfare impact of revenue management, a practice which is widely spread in the transport industry, but whose impact on consumer surplus remains unclear. We develop a theoretical model of revenue management allowing for heterogeneity in product characteristics, capacity constraints, consumer preferences, and probabilities of arrival. We also introduce dynamic competition between revenue managers. We solve this model computationally and recover the optimal pricing strategies. We find that revenue management is generally welfare enhancing as it raises the number of sales.

Suggested Citation

  • Nicolas Dupuis & Marc Ivaldi & Jerome Pouyet, 2020. "A Welfare Assessment of Revenue Management Systems," Post-Print hal-02936706, HAL.
    • Handle: RePEc:hal:journl:hal-02936706
    DOI: 10.1515/rne-2020-0038
    as

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    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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