A Framework and Models for Evaluating the Multifare Dynamic Pricing Mechanism of Low-cost Carriers

Autor: I-Wen Wu, Yi-Ya Peng, Kuancheng Huang
Rok vydání: 2013
Předmět:
Zdroj: Transportation Journal. 52:308-322
ISSN: 2157-328X
0041-1612
DOI: 10.5325/transportationj.52.3.0308
Popis: In general, traditional airlines (legacy airlines or full-service airlines) develop multifare mechanisms and rely on seat inventory control to make quantity-based decisions. On the other hand, low-cost carriers (LCCs) tend to adopt the single-fare system and dynamically adjust the price. Nonetheless, more and more LCCs have begun to offer multiple-fare classes so as to take advantage of market segmentation and price discrimination. In order to evaluate the effectiveness of various revenue management (RM) mechanisms, the concept of willingness-to-pay is applied to model the customer choice with respect to RM control decisions. Dynamic programming–based models are then developed to provide a unified framework to evaluate the dynamic pricing mechanism of LCCs against the traditional seat inventory control policy that makes the open/close decisions of the fare classes with predetermined prices. Based on the numerical experiment, it is found that the former results in significantly higher revenue than the latter.
Databáze: OpenAIRE
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