Pricing Analytics and Revenue Management

Chapter 2: Single Resource Capacity Control Problem (SRCCP)

Some Examples:
1. Assume a two-fare class flight. Demand of discount and full fare class are assumed to be
uniform. Demand of discount fare can be any number between 60 and 100 while the demand of
full fare class can be any number between 50 and 80. Suppose the capacity of the flight is 100
seats and the price of full fare is $2400 and discount fare is $1500. What should be the
protection level for full fare class?
2. Assume the previous example with Normal distribution. Assume the demand of full fare class
follows a Normal distribution with mean of 65 (the mean of uniform distribution) and standard
deviation of 9 (standard deviation of the uniform distribution). Here we are approximating the
previous uniform distribution by a Normal distribution. Let us see how the result changes.
3. Suppose a 3-class flight with normal distribution for demands. Class the 3 is the lowest fare and
class 1 is the highest fare. Assume the full capacity of the flight is 180 seats.
P3=$1000, P2=$1500, and P1=$2000
𝐷1 ~𝑁[60, 102 ] , 𝐷2 ~𝑁[90, 152 ] , and 𝐷3 ~𝑁[120, 202 ]
Obtain the protection levels using EMSR heuristics.