First emerged in the airline industry in the late 70s after US airline deregulation, revenue management collectively refers to the tactical use of quantitative models to predict demand and customer preferences, and optimize product assortment and pricing strategies. It focuses on how firms in various industries should manage capacity and product availability, set and update prices across different selling channels with the goal of maximizing profitability. This course provides an introduction to both the theory and practice of revenue management. This course will discuss the theory underlying revenue management as well as practical case studies and how to apply this theory.
Students will learn the essential principles and tools of pricing and revenue management. This includes:
- Introduction to revenue management
- Demand forecasting
- Capacity allocation & Overbooking
- Customer choice modeling
- Price optimization and markdown pricing
- dynamic pricing with constrained supply
- peak load pricing
- personalized promotions
- personalized pricing
- Use classic revenue management techniques, such as unconstraining censored demand, “critical ratio” and “expected marginal seat revenue” methods, to make capacity allocation and overbooking decisions;
- Use data to estimate an appropriate price demand relationship;
- Use estimated price demand relationship to optimize price and provide appropriate recommendations to managers regarding pricing, both in variable pricing as well as dynamic pricing;
- Comprehend revenue management related research articles, articulate analysis and conclusions during class discussion and written examinations; and,
- Communicate complex models and analytics to managers without formal training in analytics.