Abstract
In many industries, sellers have the opportunities to enhance their revenues through dynamic pricing of their perishable products, such as flight tickets, hotel rooms or car rental that would become worthless if they are not sold at the end of the selling horizon. For customers, they may substitute their choices to higher quality products with additional payment or cheaper ones due to budget constraint. Therefore, how to dynamically adjust the prices of substitutable perishable products through the remaining selling horizon and the amount of unsold products to maximize the revenue is an important issue. In this thesis, we construct a dynamic pricing model where a seller offers two substitutable perishable products over a finite time horizon in the monopolist market. We firstly compute time thresholds for all inventory levels of the substitutable perishable products. Then seller can dynamically adjust prices to maximize the expected revenue. Furthermore, we extended the pricing model to cancellation and refund policy. Finally, a numerical example is given to demonstrate the procedure and the results as follows: first, time thresholds of the price are more sensitive to their own inventory levels than to the substitutes’ inventory level. Second, time thresholds would become earlier when the cancellation rate increases. Third, it shows that cancellation policy is effective in enhancing revenue.