Article ID: | iaor200969125 |
Country: | United Kingdom |
Volume: | 8 |
Issue: | 4 |
Start Page Number: | 373 |
End Page Number: | 387 |
Publication Date: | Aug 2009 |
Journal: | Journal of Revenue and Pricing Management |
Authors: | Scherrer Christina R, Griffin Paul |
Keywords: | yield management |
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.