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Optimal Pricing Policies for Perishable Products

Miguel F Anjos (anjos***at***stanfordalumni.org)
Russell C H Cheng (R.C.H.Cheng***at***maths.soton.ac.uk)
Christine S M Currie (C.S.M.Currie***at***maths.soton.ac.uk)

Abstract: In many industrial settings, managers face the problem of establishing a pricing policy that maximizes the revenue from selling a given inventory of items by a fixed deadline, with the full inventory of items being available for sale from the beginning of the selling period. This problem arises in a variety of industries, including the sale of fashion garments, flight seats, and hotel rooms. We present a family of continuous pricing functions for which the optimal pricing strategy can be explicitly characterized and easily implemented. These pricing functions are the basis for a general pricing methodology which is particularly well suited for application in the context of an increasing role for the Internet as a means to market goods and services.

Keywords: Pricing, Internet, Yield Management, Finite Horizon,Optimal Policy.

Category 1: Applications -- OR and Management Sciences

Category 2: Applications -- OR and Management Sciences (Yield Management )

Category 3: Applications -- OR and Management Sciences (Airline Optimization )

Citation: European Journal of Operational Research, Vol 166/1, 2005, 246-254.

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Entry Submitted: 03/01/2004
Entry Accepted: 03/01/2004
Entry Last Modified: 02/09/2005

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