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The University of Southampton
Mathematical Sciences

Research project: Revenue management

Currently Active: 

Revenue management is the process of setting prices so as to maximise a company’s revenue. Airlines are perhaps the most well-known users of Revenue Management but its use in other less traditional industries, e.g. online advertising, fashion retailing, is growing. With the widespread availability of the Internet, it is now possible for consumers to access pricing information far more easily; consequently price competition has become a much more important factor in a consumer’s choice of which product to buy. Within Mathematics, Revenue Management is researched by Christine Currie and Joerg Fliege.

Areas of Interest:

  1. Competition in Revenue Management: investigate the impact of price competition on the optimal prices to be charged for perishable products, e.g. airline seats. Competition has a huge influence on customer buying behaviour and will impact on the optimal price that companies should charge for goods or services. We consider situations where a company is selling an inventory of identical items by a fixed time and there is one competing seller, e.g. airline tickets, hotel rooms. What prices should be set over the selling period to maximise revenue?
    • Set up a probabilistic model of customer demand, which is influenced by the prices offered by the company and the competitor, and the time left until the end of the selling period
    • Use Calculus of Variations to maximise revenue subject to capacity constraints. The work was implemented by a major UK airline to help maximise revenue on its short-haul routes.
  2. Customer Choice Modelling: finding efficient methods for parameterisation of customer choice models in revenue management systems; dealing with sparse data; optimising a firm’s offerings to maximise overall revenue.
  3. Combining Revenue Management with Vehicle Routing: setting delivery prices to minimise delivery costs; using pricing to influence customers’ decisions.
    The work was carried out in collaboration with a major UK e-grocer.
  4. Revenue Management in the ferry industry – optimising fares for different vehicle types.
    This work is being carried out in collaboration with two major UK ferry companies.

Related research groups

Operational Research
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