As a pricing analyst in the revenue management department at Air France, you are asked to come up with a flexible pricing algorithm for a particular daily flight from Paris to Athens. The flight has a list price of €80, and it is rarely fully booked when it takes off. There is a price-sensitive segment of the market that is willing to book this flight more than 28 days ahead of time. Also, there is a price-insensitive segment of the market (business travelers) who are willing to pay a high price for the flight if they are able to book it close to the day of the flight. Given this information, you decide to use the pricing algorithm flowchart in Figure 17.1.

(a) When a customer requests a price for the flight, the date of the request and the date of the flight is inputted into the booking-curve module and the purchase-history module. Explain how each of these modules processes that information and describes the information that is outputted by the purchase-history module.

(b) Describe how the algorithm calculates the business-traveler premium.

(c) How does the algorithm combine the output of the purchase-history module and the business-traveler premium to arrive at a price in response to the customer’s request. Explain why this calculation makes sense.

(d) If the customer purchases the flight at the quoted price, describe what the algorithm does with that information.

 

Transcribed Image Text:

Customer price inquiry Date of inquiry Booking- Purchase-history module curve and date of stay module Business-traveler premium last-minute value - (last-minute value x proportion of the 28 days remaining) P(sold), average selling price Price = [p(sold) x average selling price)] + business-traveler premium Customer response Customer price inquiry Date of inquiry Booking- Purchase-history module curve and date of stay module Business-traveler premium last-minute value - (last-minute value x proportion of the 28 days remaining) P(sold), average selling price Price = [p(sold) x average selling price)] + business-traveler premium Customer response

Answer rating: 100% (QA)

A When a customer X requests the flight the booking curve module helps to determine multiple factors ... View the full answer