Multiobjective Optimization Model for Pricing and Seat Allocation Problem in Non Profit Performing Arts Organization

28 Pages Posted: 19 Dec 2016

See all articles by Andrea Baldin

Andrea Baldin

Ca Foscari University of Venice - Department of Management

Trine Bille

Copenhagen Business School - Department of Management, Politics and Philosophy

Andrea Ellero

Ca Foscari University of Venice - Department of Management

Daniela Favaretto

Ca Foscari University of Venice - Department of Management

Date Written: December 1, 2016

Abstract

The implementation of Revenue Management (RM) techniques in non profit performing arts organizations presents new challenges compared to other sectors, such as transportion or hospitality industries, in which these techniques are more consolidated. Indeed, performing arts organizations are characterized by a multi-objective function that is not solely limited to revenue. On the one hand, theatres aim to increase revenue from box office as a consequence of the systematic reduction of public funds; on the other hand they pursue the objective to increase its attendance. A common practice by theatres is to incentive the customers to discriminate among themselves according to their reservation price, offering a schedule of different prices corresponding to different seats in the venue. In this context, price and allocation of the theatre seating area are decision variables that allow theatre managers to manage these two conflicting goals pursued. In this paper we introduce a multi-objective optimization model that jointly considers pricing and seat allocation. The framework proposed integrates a choice model estimated by multinomial logit model and the demand forecast, taking into account the impact of heterogeneity among customer categories in both choice and demand. The proposed model is validated with booking data referring to the Royal Danish Theatre during the period 2010-2015.

Keywords: Multi-objective optimization, Pricing, Seat allocation, Multinomial logit model, Theatre demand

JEL Classification: M40

Suggested Citation

Baldin, Andrea and Bille, Trine and Ellero, Andrea and Favaretto, Daniela, Multiobjective Optimization Model for Pricing and Seat Allocation Problem in Non Profit Performing Arts Organization (December 1, 2016). Department of Management, Università Ca' Foscari Venezia Working Paper No. 2016 / 20, Available at SSRN: https://ssrn.com/abstract=2887422

Andrea Baldin

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

Trine Bille

Copenhagen Business School - Department of Management, Politics and Philosophy ( email )

Copenhagen, DK-2200
Denmark

Andrea Ellero

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

Daniela Favaretto (Contact Author)

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

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