Abstract
As multi-product problem becomes more and more common today, customers may substitute their initial choice to a cheaper one they can afford or upgrade with additional payment to get higher service level. In many industries, such as airline seats allocation, hotel rooms or seasonal fashion goods, seller must consider customer reaction from the strategic prices on each product and its interaction to enhance the revenue in a finite sales horizon. Hence, we proposed a dynamic pricing model where a sell offers two substitutable perishable products in the monopolist market. The objective is to maximize the total profit gain from both two products. In this thesis, we analyze the problem using a multinomial logit model to describe the customer choice behavior. The exact solution is obtained according to the calculated optimal time thresholds. Sellers can dynamically adjust the price policy in the continuous-time process. We also analyze the efficient price strategy based on the marginal expected revenue function. Furthermore, a numerical example is illustrated to show the procedure and the resultant is compared with the fixed price policy.