How to Price: A Guide to Pricing Techniques and Yield Management / Edition 1

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About the Author:
Oz Shy is a Research Professor at WZB - Social Science Research Center in Berlin, Germany, and a Professor of Economics at the University of Haifa, Israel

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Editorial Reviews

From the Publisher
"This book provides an extremely valuable introduction to 'the art of pricing'. The strength of the book lies in its judicious choice of the topics to be covered and accessibility to a wide range of audiences from advanced undergraduates to practitioners who may have limited technical knowledge. In particular, the coverage of the book on 'yield management' truly stands out, where Oz Shy offers a very elegant, intuitive, and simple presentation of dynamic pricing techniques with capacity constraints that have been widely used in the airline and hotel industries. In summary, the book is bound to be the best single source for anyone interested in this broad topic of practical importance.” - Jay Pil Choi, Michigan State University

"Oz Shy has yet again succeeded in providing an innovative and lucid exposition of a longstanding issue: how to price. The outcome is a cleverly presented toolkit for understanding yield management and pricing strategies. The comprehensible yet rigorous style, its original focus and varying levels of mathematical formalization, as well as the novel use of computer algorithms make this book an exceptionally useful instrument not only for teachers and students in economics, management, and marketing, but also for practitioners and business people." - Tomaso Duso, Social Science Research Center Berlin

"A valuable book for both students and practitioners — it will be a key reference for anyone working in the field. The author is an expert who himself has made important contributions to industrial organization." - Paul Klemperer, Oxford University

"How to Price is a coherent and straight to the point introduction to the state of the art of strategic pricing. This book is especially suitable for master's level students in economics as well as managers responsible for pricing decisions. At the targeted level the book is the first in its kind." - Staffan Ringbom, Swedish School of Economics and Business Administration, Helsinki, and HECER

"Oz Shy's book offers an up-to-date, economically sophisticated, and highly practical guide to pricing. Better pricing leads to better profits." - Hal Varian, University of California, Berkeley

"This is a must-read for all economists interested in pricing of services. It provides a wealth of exciting pricing issues and their solutions. It is accessible for undergraduates, yet exceedingly valuable to graduate economists, MBA students, practitioners and researchers. It is both a textbook and a reference for the various types of pricing. At the same time, it provides algorithms for those trying to apply the concepts in practice. Oz Shy has shown us the usefulness of applying economic concepts to pricing and provides us with fun in doing so." - Ingo Vogelsang, Boston University

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Product Details

  • ISBN-13: 9780521715645
  • Publisher: Cambridge University Press
  • Publication date: 2/28/2008
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 448
  • Product dimensions: 6.97 (w) x 9.96 (h) x 0.79 (d)

Table of Contents

Preface     xi
Introduction to Pricing Techniques     1
Services, Booking Systems, and Consumer Value     2
Overview of Pricing Techniques     5
Revenue Management and Profit Maximization     9
The Role Played by Capacity     10
YM, Consumer Welfare, and Antitrust     12
Pricing Techniques and the Use of Computers     13
The Literature and Presentation Methods     14
Notation and Symbols     14
Demand and Cost     19
Demand Theory and Interpretations     20
Discrete Demand Functions     24
Linear Demand Functions     26
Constant-elasticity Demand Functions     30
Aggregating Demand Functions     34
Demand and Network Effects     39
Demand for Substitutes and Complements     42
Consumer Surplus     45
Cost of Production     52
Exercises     56
Basic Pricing Techniques     59
Single-market Pricing     60
Multiple Markets without Price Discrimination     67
Multiple Markets with Price Discrimination     79
Pricing under Competition     89
Commonly Practiced Pricing Methods     99
Regulated Public Utility     104
Exercises     110
Bundling and Tying     115
Bundling     117
Tying     131
Exercises     145
Multipart Tariff     151
Two-part Tariff with One Type of Consumer     152
Two-part Tariff with Multiple Consumer Types     159
Menu of Two-part Tariffs     165
Multipart Tariff     171
Regulated Public Utility     176
Exercises     178
Peak-load Pricing     181
Seasons, Cycles, and Service-cost Definitions     183
Two Seasons: Fixed-peak Case     185
Two Seasons: Shifting-peak Case     190
General Computer Algorithm for Two Seasons     194
Multi-season Pricing     194
Season-interdependent Demand Functions     201
Regulated Public Utility     205
Demand, Cost, and the Lengths of Seasons     214
Exercises     223
Advance Booking     227
Two Booking Periods with Two Service Classes     232
Multiple Periods with Two Service Classes     238
Multiple Booking Periods and Service Classes     245
Dynamic Booking with Marginal Operating Cost     248
Network-based Dynamic Advance Booking     250
Fixed Class Allocations     254
Nested Class Allocations     258
Exercises     262
Refund Strategies     265
Basic Definitions     267
Consumers, Preferences, and Seller's Profit     270
Refund Policy under an Exogenously Given Price     274
Simultaneous Price and Refund Policy Decisions     280
Multiple Price and Refund Packages     288
Refund Policy under Moral Hazard     290
Integrating Refunds within Advance Booking     293
Exercises     294
Overbooking     297
Basic Definitions     299
Profit-maximizing Overbooking     305
Overbooking of Groups     313
Exercises     322
Quality, Loyalty, Auctions, and Advertising     325
Quality Differentiation and Classes     326
Damaged Goods     332
More on Pricing under Competition     335
Auctions     343
Advertising Expenditure     352
Exercises     355
Tariff-choice Biases and Warranties     359
Flat-rate Biases      360
Choice in Context and Extremeness Aversion     362
Other Consumer Choice Biases     366
Warranties     369
Exercises     375
Instructor and Solution Manual     377
To the Reader     377
Manual for Chapter 2: Demand and Cost     378
Manual for Chapter 3: Basic Pricing Techniques     382
Manual for Chapter 4: Bundling and Tying     387
Manual for Chapter 5: Multipart Tariff     391
Manual for Chapter 6: Peak-load Pricing     395
Manual for Chapter 7: Advance Booking     402
Manual for Chapter 8: Refund Strategies     406
Manual for Chapter 9: Overbooking     411
Manual for Chapter 10: Quality, Loyalty, Auctions, and Advertising     414
Manual for Chapter 11: Tariff-choice Biases and Warranties     417
References     421
Index     431
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