Optimal Dynamic Pricing for Perishable Assets with Consumer's No-show Behavior

Abstract

Consumers may not show up in the consumption time after the reservation. In consideration of this no-show behavior, this paper incorporates it into dynamic pricing problem in the airline industry. Low cost carrier is chosen to analyze retailer's optimal pricing problem. Dynamic pricing model is formulated from inventory perspective. Optimal analysis shows that, there is a unique optimal solution for this pricing problem. It is also given that consumer's no-show probability has an effect on the expected revenue. Numerical analysis is used to verify the result. Besides, research finding shows that the effect of consumers’ no-show probability on optimal decision depends on the inventory level. The analysis findings provide some insights to managers in the industry with perishable assets.