Dynamic Revenue and Project Management

Abstract

We consider a service provider who makes dynamic pricing decisions for deadline-based projects with specific resource requirements. The provider receives service requests and quotes a menu of prices for different completion times, based on the project type and resources required to complete the project. Given the fixed resource capacity per period, the provider has the flexibility of processing a project in different time periods as long as all projects are completed by their respective deadlines. This flexibility adds a dimension of dynamic project scheduling to the provider's decision, making it a non-traditional dynamic network revenue management (DNRM) problem. We first present a procedure to reformulate this problem as a traditional DNRM and show that the reformulation is equivalent to the original problem. We then consider the dynamic problem of setting prices for different completion times and present a fast, effective, and scalable procedure to approximately solve the problem. The approximate solution provides a real-time pricing strategy as well as an upper bound on the optimal revenue for the purpose of evaluation. We discuss how to extend the procedure to general choice models under fairly mild assumptions. We numerically test the procedure under various choice models and parameter settings and demonstrate its effectiveness.