A Welfare Assessment of Revenue Management Systems

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. Link to the article

DUPUIS, N., IVALDI, M. and POUYET, J. (2020). A Welfare Assessment of Revenue Management Systems. Review of Network Economics, 19(1), pp. 1-41.

Keywords : #dynamic-computational-models, #intertemporal-price-discrimination, #revenue-management, #transport-fares