Revenue Management with Partially Refundable Fares

Authors:
Guillermo Gallego;Özge Şahin
Affiliations:
Department of Industrial Engineering and Operations Research, Columbia University, New York, New York 10027;Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109
Venue:
Operations Research
Year:
2010

Citing 13
Cited 4

Optimal price skimming by a monopolist facing rational consumers

Management Science
Optimal dynamic pricing of inventories with stochastic demand over finite horizons

Management Science
Revenue Management: Research Overview and Prospects

Transportation Science
Electronic Tickets, Smart Cards, and Online Prepayments: When and How to Advance Sell

Marketing Science
Perishable Asset Revenue Management with Markovian Time Dependent Demand Intensities

Management Science
Commissioned Paper: An Overview of Pricing Models for Revenue Management

Manufacturing & Service Operations Management
Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions

Management Science
Revenue Management Under a General Discrete Choice Model of Consumer Behavior

Management Science
Revenue Management of Flexible Products

Manufacturing & Service Operations Management
Models of the Spiral-Down Effect in Revenue Management

Operations Research
On the Choice-Based Linear Programming Model for Network Revenue Management

Manufacturing & Service Operations Management
Optimal Pricing of Seasonal Products in the Presence of Forward-Looking Consumers

Manufacturing & Service Operations Management
Dynamic Pricing Strategies with Reference Effects

Operations Research

Optimal Preorder Strategy with Endogenous Information Control

Management Science
Consumption Externality and Yield Uncertainty in the Influenza Vaccine Supply Chain: Interventions in Demand and Supply Sides

Management Science
Advance Selling When Consumers Regret

Management Science
Pricing Time-Sensitive Services Based on Realized Performance

Manufacturing & Service Operations Management

Quantified Score

Hi-index	0.00

Visualization

Abstract

We introduce and analyze an intertemporal choice model where customer valuations are uncertain and evolve over time. The model leads directly to the study of call options on capacity that are similar to partially refundable fares. We show that the capacity provider earns significantly higher revenues by selling real options on capacity than on low-to-high pricing. We also investigate the social implications and show that the use of options is both socially optimal and socially efficient.