Optimal pricing and capacity allocation for two competitive airlines

Due to fierce competition in airline market, recently, many airlines have been faced the challenge of joint determining of optimal pricing and capacity allocation. This problem is more complex by considering actual assumptions of flexible partitions in flight’s cabins and additionally demand uncertainty. Thus, we consider pricing and capacity allocation in a duopoly of single-flight leg for two competitive airlines. There is a flexible partitioning of the business and economy cabins and demand is assumed pricedependent with additive uncertainty. The decisions ofcapacity and pricing are provided simultaneously through indirect channels. The numerical results illustrate that how demand shape andcompetition factors change the pricing, capacity and revenue levels. We found that intensified competition never leads to higher prices. Thus a competitive network of airlines provides better match between channels, fare classes and better revenue arrangement.

کلیدواژه ها:

Revenue management ، Pricing ، Capacity allocation ، Competition ، Airline Networks