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Product line pricing for services with capacity constraints and dynamic substitution

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  • Burkart, Wolfgang R.
  • Klein, Robert
  • Mayer, Stefan

Abstract

In this paper, we address a service provider’s product line pricing problem for substitutable products in services, such as concerts, sporting events, or online advertisements. For each product, a static price is selected from a pre-defined set such that the total revenue is maximised. The products are differentiated by some of their attributes, and their availability is restricted due to individual capacity constraints. Furthermore, they are simultaneously sold during a common selling period at the end of which the service is delivered. Consumers differ from one another with respect to their willingness to pay, and, hence, their reservation prices vary depending on the product. In the event of a purchase, they choose the product that maximises their consumer surplus.

Suggested Citation

  • Burkart, Wolfgang R. & Klein, Robert & Mayer, Stefan, 2012. "Product line pricing for services with capacity constraints and dynamic substitution," European Journal of Operational Research, Elsevier, vol. 219(2), pages 347-359.
    • Handle: RePEc:eee:ejores:v:219:y:2012:i:2:p:347-359
    DOI: 10.1016/j.ejor.2011.12.026
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    References listed on IDEAS

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    Cited by:

    1. Mayer, Stefan & Klein, Robert & Seiermann, Stephanie, 2013. "A simulation-based approach to price optimisation of the mixed bundling problem with capacity constraints," International Journal of Production Economics, Elsevier, vol. 145(2), pages 584-598.
    2. Mayer, Stefan & Steinhardt, Claudius, 2016. "Optimal product line pricing in the presence of budget-constrained consumers," European Journal of Operational Research, Elsevier, vol. 248(1), pages 219-233.
    3. Hossein Jahandideh & Julie Ward Drew & Filippo Balestrieri & Kevin McCardle, 2020. "Individualized Pricing for a Cloud Provider Hosting Interactive Applications," Service Science, INFORMS, vol. 12(4), pages 130-147, December.
    4. Shin, Hojung & Park, Soohoon & Lee, Euncheol & Benton, W.C., 2015. "A classification of the literature on the planning of substitutable products," European Journal of Operational Research, Elsevier, vol. 246(3), pages 686-699.
    5. Moon, Ilkyeong & Park, Kun Soo & Hao, Jing & Kim, Dongwook, 2017. "Joint decisions on product line selection, purchasing, and pricing," European Journal of Operational Research, Elsevier, vol. 262(1), pages 207-216.
    6. Maclean, K.D.S. & Ødegaard, F., 2020. "Dynamic capacity allocation for group bookings in live entertainment," European Journal of Operational Research, Elsevier, vol. 287(3), pages 975-988.
    7. Zhang, Yu & Huang, Min & Tian, Lin & Cai, Gangshu George & Jin, Delong & Fan, Zhiping, 2023. "Manufacturer’s product line selling strategy and add-on policy in product sharing," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1332-1343.

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