Using Flexible Products to Cope with Demand Uncertainty in Revenue Management

36 Pages Posted: 21 Nov 2012 Last revised: 21 Sep 2014

See all articles by Anita Petrick

Anita Petrick

Darmstadt University of Technology

Claudius Steinhardt

Bundeswehr University Munich

Jochen Gönsch

University of Duisburg-Essen - Mercator School of Management

Robert Klein

University of Augsburg

Date Written: October 31, 2009

Abstract

While flexible products have been popular for many years in practice, they have only recently gained attention in the academic literature on revenue management. When selling a flexible product, a firm retains the right to specify some of its details later. The relevant point in time is after the sale, but often before the provision of the product or service, depending on the customers’ need to know the exact specification in advance. The resulting flexibility can help to increase revenues if capacity is fixed and the demand to come difficult to forecast. We present several revenue management models and control mechanisms incorporating this kind of flexible products. An extensive numerical study shows how the different approaches can mitigate the negative impact of demand forecast errors.

Keywords: Revenue Management, Flexible Products, Capacity Control

JEL Classification: C44

Suggested Citation

Petrick, Anita and Steinhardt, Claudius and Gönsch, Jochen and Klein, Robert, Using Flexible Products to Cope with Demand Uncertainty in Revenue Management (October 31, 2009). OR Spectrum 34 (2012), pp. 215-242., Available at SSRN: https://ssrn.com/abstract=2179226

Anita Petrick

Darmstadt University of Technology ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

Claudius Steinhardt

Bundeswehr University Munich ( email )

Werner-Heisenberg-Weg 39
Neubiberg, 85577
Germany

HOME PAGE: http://www.unibw.de/quantitative-methoden

Jochen Gönsch (Contact Author)

University of Duisburg-Essen - Mercator School of Management ( email )

Lotharstraße 65
Duisburg, Nordrhein-Westfalen 47057
Germany
+49 203 379 - 2777 (Phone)
+49 203 379 - 1760 (Fax)

HOME PAGE: http://udue.de/goensch

Robert Klein

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

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