Abstract
It seems rather that customers who pay higher prices for otherwise identical products/services should be more valuable to the firm. However, we show that in dynamic pricing situations with limited capacity (airlines, hotels, advertisers, sports/concert venues, etc.) this intuition could be potentially flawed: a customer who pays less could have a higher value than one who pays more, even when both purchase the same quantities, with the same frequency, and are equally loyal and satisfied. More so, in such situations the expected value of a customer could be independent of, or even decrease in, the price paid by the customer. That said, we also show that certain non-stationary customer arrival patterns could restore the intuitive directional relationship that higher-paying customers are more valuable.
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