Dynamic pricing decision analysis for parallel flights in competitive markets

With the development of information technology, dynamic pricing has been a problem in revenue management in the airline and other service industries. Most studies, however, focused on monopolistic models and ignored the fact that more airlines compete in the same area. In this paper, we develop an analytic model to describe real-time dynamic price competitions between airlines that sell tickets of parallel flights, and use the model to predict the market equilibrium. We derive two competition polices. We use numerical examples to demonstrate the benefits of incorporating this game-theoretic model to set prices and the efficiency of our strategy.