Real-Time Dynamic Pricing for Revenue Management with Reusable Resources, Advance Reservation, and Deterministic Service Time Requirements

Abstract

In “Real-Time Dynamic Pricing for Revenue Management with Reusable Resources, Advance Reservation, and Deterministic Service Time Requirements,” Lei and Jasin consider a fundamental dynamic pricing problem when resources are reusable. In this problem, demand arrives according to a price-sensitive nonstationary rate, requesting a service that uses a combination of different types of resources for a deterministic duration of time. The resources are reusable in the sense that they can be immediately used to serve a new customer on the completion of the previous service. Moreover, different customers may have different service time requirement and may book the service in advance. The objective is to construct a dynamic pricing control that maximizes expected total revenues. They develop real-time heuristic controls based on the solution of the deterministic relaxation of the original stochastic problem and show that the proposed controls are near optimal in the regime of large demand and large resource capacity.