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Pricing and Revenue Optimization

Pricing and Revenue Optimization

This book offers the first introduction to the concepts, theories, and applications of pricing and revenue optimization. From the initial success of "yield management" in the commercial airline industry down to more recent successes of markdown management and dynamic pricing, the application of mathematical analysis to optimize pricing has become increasingly important across many different industries. But, since pricing and revenue optimization has involved the use of sophisticated mathematical techniques, the topic has remained largely inaccessible to students and the typical manager. With methods proven in the MBA courses taught by the author at Columbia and Stanford Business Schools, this book presents the basic concepts of pricing and revenue optimization in a form accessible to MBA students, MS students, and advanced undergraduates. In addition, managers will find the practical approach to the issue of pricing and revenue optimization invaluable.

With updates to every chapter, this second edition covers topics such as estimation of price-response functions and machine-learning-based price optimization. New discussions of applications of dynamic pricing and revenue management by companies such as Amazon, Uber, and Disney, and in industries such as sports, theater, and electric power, are also included. In addition, the book provides current coverage of important applications such as revenue management, markdown management, customized pricing, and the behavioral economics of pricing.

Chapter 1. Background

Chapter 2. Introduction to Pricing and Revenue Optimization

Chapter 3. Models of Demand

Chapter 4. Estimating Price Response

Chapter 5. Optimization

Chapter 6. Price Differentiation

Chapter 7. Pricing with Constrained Supply

Chapter 8. Revenue Management

Chapter 9. Capacity Allocation

Chapter 10. Network Management

Chapter 11. Overbooking

Chapter 12. Markdown Management

Chapter 13. Customized Pricing

Chapter 14. Behavioral Economics and Pricing

Appendix A: Optimization

Appendix B: Probability

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