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Estimating the gains (and losses) of revenue management
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D'Haultfoeuille, Xavier, Wang, Ao, Février, Philippe and Wilner, Lionel (2022) Estimating the gains (and losses) of revenue management. Working Paper. Coventry, UK: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1412). (Unpublished)
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Official URL: https://warwick.ac.uk/fac/soc/economics/research/w...
Abstract
Despite the wide adoption of revenue management in many industries such as airline, railway, and hospitality, there is still scarce empirical evidence on the gains or losses of such strategies compared to uniform pricing or fully flexible strategies. We quantify such gains and losses and identify their underlying sources in the context of French railway transportation. The identification of demand is complicated by censoring and the absence of exogenous price variations. We develop an original identification strategy combining temporal variations in relative prices, consumers’ rationality and weak optimality conditions on the firm’s pricing strategy. Our results suggest similar or better performance of the actual revenue management compared to optimal uniform pricing, but also substantial losses of up to 16.2% compared to the optimal pricing strategy. We also highlight the key role of revenue management in acquiring information when demand is uncertain.
Item Type: | Working or Discussion Paper (Working Paper) | ||||||
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Subjects: | H Social Sciences > HD Industries. Land use. Labor | ||||||
Divisions: | Faculty of Social Sciences > Economics | ||||||
Library of Congress Subject Headings (LCSH): | Revenue management, Pricing, Demand (Economic theory) | ||||||
Series Name: | Warwick economics research papers series (WERPS) | ||||||
Publisher: | University of Warwick. Department of Economics | ||||||
Place of Publication: | Coventry, UK | ||||||
ISSN: | 0083-7350 | ||||||
Official Date: | 22 June 2022 | ||||||
Dates: |
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Number: | 1412 | ||||||
Institution: | University of Warwick | ||||||
Status: | Not Peer Reviewed | ||||||
Publication Status: | Unpublished | ||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||
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