Degree
Doctor of Philosophy
Program
Business
Supervisor
Peter Bell
Abstract
Dynamic pricing models in revenue management lack the ability to have multiple firms selling multiple product classes. In this thesis, a framework is created that allows for the construction of revenue management models with multiple firms, each selling multiple product types and where the firms have the ability to alter their prices instantly based on market conditions. The framework is a finite repeated game, where the optimal price for each state can be calculated through backwards induction. Conditions for existence of pure strategy Nash Equilibria are proven and conditions for unique pure strategy Nash Equilibria are discussed. We illustrate the pricing dynamics in a 2x1 and a 2x3 model. We recreate the well-known Netessine and Shumsky airline duopoly model but allow the firms to use dynamic pricing rather than booking limits. We find that in all cases the revenues from a dynamic pricing approach exceed those from booking limits. Through the use of three examples we show that our model provides vastly increased revenues over traditional models as it considers cross-price elasticities and how firms should alter their prices in response to the quantity levels of all products in the market.
Recommended Citation
Moffatt, Michael P., "Revenue Management in Multi-Firm, Multi-Product Price Competition" (2012). Electronic Thesis and Dissertation Repository. 452.
https://ir.lib.uwo.ca/etd/452