Dynamic Pricing for Project-Oriented Production: A Comparison to Current Pricing Techniques

Previous research on dynamic pricing has concentrated primarily on small projects using inflexible capacity. In this paper, we discuss the differences between this work and dynamic pricing for project-oriented production (POP). POP is formally defined and limitations of current dynamic pricing and revenue management techniques for this industry are demonstrated through empirical results. A new heuristic that exploits the flexible capacity of POP industries is developed for such industries and computational results are presented for its performance over a range of dynamic pricing environments. We test the heuristic on a variety of job sizes and rates, and our numerical results indicate that the heuristic significantly outperforms other heuristics in the literature for jobs that fall into the POP category