A stochastic dynamic pricing model for the multiclass problems in the airline industry

Otero, D.; Akhavan-Tabatabaei, Raha

doi:10.1016/j.ejor.2014.09.038

Cited by 34 publications

(14 citation statements)

References 10 publications

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“…Formula (19) indicates that the demand is not negative, and Formula (20) means the fare is increased with the OD distance. Formula (21) is an upside down constraint, showing that the sum of fares of each section on an OD should be no less than the OD fare, and Formula (22) is an integer constraint of the fare.…”

Section: Methodsmentioning

confidence: 99%

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Differential Pricing Strategies of High Speed Railway Based on Prospect Theory: An Empirical Study from China

Qin

et al. 2019

Sustainability

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Based on the single pricing method of the high-speed railway (HSR) in China, a pricing strategy without flexibility leads to the problem of extreme fluctuations in passenger flow and difficulty in increasing revenue. In order to achieve sustainable development of the HSR from the perspective of pricing, in this study, we divided the passenger market according to the different factors affecting passengers' choice behavior, maximized ticket sales revenue with expected travel cost as the reference point, and used prospect theory to construct a differentiated pricing model under elastic demand. A simulated annealing algorithm was used to solve this model under two passenger flow intensities. Taking the Beijing-Shanghai corridor as an example for analysis, the results show that differential pricing can be implemented on the basis of passenger decision-making, and price reductions at off-peak periods will attract passenger flow which will increase ticket sales revenue by 10.41%. During the peak period, prices can be increased to maintain passenger flow, and ticket sales revenue will increase by 7.98%. We also found that increasing passenger expectations have a greater impact on ticket sales. This study provides theoretical and methodological support for the sustainable development of the HSR.

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Section: Methodsmentioning

confidence: 99%

“…It is still in the exploratory stage of learning from the experience of airline pricing. The research mainly includes dynamic pricing and differentiated pricing [21].…”

Section: Development and Research Of Hsr Pricingmentioning

confidence: 99%

Differential Pricing Strategies of High Speed Railway Based on Prospect Theory: An Empirical Study from China

Qin

et al. 2019

Sustainability

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“…In recent years there has been a growing interest in price determination in the air transport industry and other perishable products distributed by the Internet, with the analysis focusing particularly on price dispersion and revenue maximization (Anjos et al, 2005;Otero and Akhavan-Tabatabaei, 2015). On the whole, this is explained by a structure of very high fixed and semi-fixed costs, which obliges companies to optimise each fare sold in order to make flights profitable (Bilotkatch, 2005;Aydin and Morefield, 2010).…”

Section: Current Researchmentioning

confidence: 99%

The impact of the internet on the pricing strategies of the European low cost airlines

Moreno‐Izquierdo

Rodríguez

Perles‐Ribes

2015

European Journal of Operational Research

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ABSTRACT:This study seeks to analyse the price determination of low cost airlines in Europe and the effect that Internet has on this strategy. The outcomes obtained reveal that both users and companies benefit from the use of ICTs in the purchase and sale of airline tickets:the Internet allows consumers to increase their bargaining power comparing different airlines and choosing the most competitive flight, while companies can easily check the behaviour of users to adapt their pricing strategies using internal information.More than 2,500 flights of the largest European low cost airlines have been used to carry out the study. The study revealed that the most significant variables for understanding pricing strategies were the number of rivals, the behaviour of the demand and the associated costs. The results indicated that consumers should buy their tickets before 25 days prior to departure.

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“…Otero, Daniel F, Akhavan-Tabatabaei, Raha proposed a stochastic dynamic pricing model. The phase distribution and update process were used to simulate the arrival time of the two subscriber and the probability of the customer to buy the ticket, and the problem of the cabin pricing at different time was solved ( Otero & Akhavan-Tabatabaei, 2015). Hu et al applyed dynamic programming methods to analyze the dynamic pricing problem, and the positive impact of passenger psychology on airline fare and revenue is analyzed (Hu, Li & Ran, 2015).…”

Section: Research Statusmentioning

confidence: 99%

A study on the dynamic refund fee model of air tickets based on win-to-win mechanism

Zhao¹,

Deng²

2019

J. airl. airpt. manag.

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Purpose: To achieve the balancing of interests between airlines and passengers, the dynamic refund fee model is designed, which meets the interests of both airlines and passengers.Design/methodology/approach: In the study, the expectation utility function is constructed respectively for passengers and airlines, and the equilibrium point of the two is chosen to solve the passenger refund fee. Then, a dynamic refund fee model based on refund time and real-time sales revenue is proposed according to the actual operating conditions of the flight.Findings:The results show that refund fee is negatively related to three variables, the ticket price, the probability of ticket sales and the probability of refund. Besides, The maximum payment limit is the airline single seat cost or the actual fare paid below it, and the lowest can be exempt.Originality/value: A better standard of the rufund is proposed. The refund mode breaks the traditional static charging mode, and charges different refund fees to passengers for different refund time and the real time income of flights. Comparing with the current refund policy, the new charge of refund fee could best meets the interests of both parties.a refund fee standard.

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A stochastic dynamic pricing model for the multiclass problems in the airline industry

Cited by 34 publications

References 10 publications

Differential Pricing Strategies of High Speed Railway Based on Prospect Theory: An Empirical Study from China

Differential Pricing Strategies of High Speed Railway Based on Prospect Theory: An Empirical Study from China

The impact of the internet on the pricing strategies of the European low cost airlines

A study on the dynamic refund fee model of air tickets based on win-to-win mechanism

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