An airline revenue management pricing game with seat allocation
by Asif Syed Raza, Ali Akgunduz
International Journal of Revenue Management (IJRM), Vol. 2, No. 1, 2008

Abstract: This paper studies a horizontal fare-pricing competition between two airlines having a single flight leg. Two distinct scenarios are considered. First, the two airlines price competition for the pre-committed booking limits is analysed. The problem is studied under deterministic price sensitive demands. The existence of unique pricing strategies at Nash equilibrium is shown. In the second scenario, a joint seat allocation and fare-pricing competition model for stochastic demand is proposed. A numerical analysis is presented to demonstrate the impacts of various market conditions on the payoffs, booking limits and pricing strategies of the competing airlines.

Online publication date: Tue, 06-May-2008

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