Assessing the Value of Dynamic Pricing in Network Revenue Management

Dynamic pricing for a network of resources over a finite selling horizon has received considerable attention in recent years, yet few papers provide effective computational approaches to solve the problem. We consider a resource decomposition approach to solve the problem and investigate the performance of the approach in a computational study. We compare the performance of the approach to three alternative approaches: static pricing, static bid-price control, and choice-based availability control. Our numerical results show that dynamic pricing policies from the network resource decomposition can achieve significant revenue lift compared with the other three alternatives. In addition, choice-based availability control is ineffective even compared with static pricing and static bid-price control. This version: August 4, 2009 1