Journal of Revenue & Pricing Management
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.
Copyright © 2009, Palgrave Macmillan.
Place of Publication
Chen, Lijian and Alexander, Suraj M., "Capacity-Driven Pricing Mechanism in Special Service Industries" (2010). MIS/OM/DS Faculty Publications. 6.
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