Document Type

Article

Publication Date

5-2010

Publication Source

Journal of Revenue & Pricing Management

Abstract

We propose a capacity driven pricing mechanism for several service industries in which the customer behavior, the price demand relationship, and the competition are significantly distinct from other industries. According our observation, we found that the price demand relationship in these industries cannot be modeled by fitted curves; the customers would neither plan in advance nor purchase the service strategically; and the competition would be largely local. We analyze both risk neutral and risk aversion pricing models and conclude the proposed capacity driven model would be the optimal solution under mild assumptions. The resulting pricing mechanism has been implemented at our industrial partner with positive results since 2005.

Inclusive pages

260-275

ISBN/ISSN

1476-6930

Document Version

Postprint

Comments

The document available for download is the authors' accepted manuscript, a post-peer-review, pre-copyedited version of an article published in the Journal of Revenue & Pricing Management. The definitive publisher-authenticated version is available online.

Permission documentation is on file.

Publisher

Palgrave-Macmillan

Volume

9

Issue

3

Place of Publication

United Kingdom

Peer Reviewed

yes