Journal of the Korean Operations Research and Management Science Society (한국경영과학회지)

The Korean Operations Research and Management Science Society (한국경영과학회)
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Yield Management Models for Two Substitutable Products

두 대체품에 대한 수익관리 모형 연구

  • Kim, Sang-Won (College of Business Administration, University of Ulsan)
  • 김상원 (울산대학교 경영대학 경영학부)
  • Received : 2015.11.17
  • Accepted : 2015.12.01
  • Published : 2016.05.31
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Abstract

Yield management, which originated from the U.S. service industry, uses pricing techniques and information systems to make demand management decisions. Demand uncertainty is an important factor in the area of demand management. A key strategy to reduce the effects of demand uncertainty is substitution. The most generally known type of substitution is inventory-driven substitution, in which consumers substitute an out-of-stock product by buying a similar or other type of product. Another type of substitution is the price-driven substitution, which occurs as a result of price changes. In this research, we consider two market segments that have unique perishable products. We develop yield management optimization models with stochastic demand based on the newsvendor model where inventory-driven and price-driven substitutions are allowed between products in the two market segments. The most significant contribution of this research is that it develops analytical procedures to determine optimal solutions and considers both types of substitution. We also provide detailed theoretical analysis and numerical examples.

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