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:: Volume 1, Issue 1 (5-2008) ::
IJOR 2008, 1(1): 74-93 Back to browse issues page
Integration of dynamic pricing and overselling with opportunistic cancellation
Mohammad Modarres , Ehsan Bolandifar
Department of Industrial Engineering, Sharif University, Tehran , Modarres@sharif.edu
Abstract:   (23171 Views)

Abstract

  We extend the concept of dynamic pricing by integrating it with “overselling with opportunistic cancellation” option, within the framework of dynamic policy. Under this strategy, to sell a stock of perishable product (or capacity) two prices are offered to customers at any given time period. Customers are categorized as high-paying and low-paying ones. The seller deliberately oversells its capacity if high paying customers show up, even when the capacity is already fully booked by low-paying customers. In that case, the sale to some low-paying customers is canceled, although an appropriate compensation must be provided. A dynamic programming approach is applied to formulate and solve this problem. We develop two models for continuous and periodic pricing, depending on the frequency of price changing. The advantage of this system over dynamic pricing model is investigated through some numerical examples. We also study some structural properties of the optimal policies.

Keywords: Dynamic Pricing; Overselling; Opportunistic Cancellation; Dynamic programming
Full-Text [PDF 204 kb]   (4509 Downloads)    
Type of Study: Original | Subject: Other
Received: 2008/09/10
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Volume 1, Issue 1 (5-2008) Back to browse issues page
مجله انجمن ایرانی تحقیق در عملیات Iranian Journal of Operations Research
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