Pricing and Revenue Management

Course Code:

ISE 429

Course Type:

Area Elective

Credits:

3

Theoric:

3

Practice:

0

Laboratory Hour:

0

ECTS:

5

Prerequisite Courses:

Operations Research II

Course Language:

English

Course Objectives:

Pricing and Revenue Management (PRM) has been described as the 'art of selling the right product to the right customer at the right time at the right place'. Companies that sell seasonal/perishable products under uncertain and changing demand use PRM to make effective pricing decisions and maximize revenues. PRM techniques are widely used in the following industries: transportation (airlines, railways, car rental companies), hospitality (hotels, cruise lines), media (television advertising, internet ad sales), health (hospitals, clinics), retail, manufacturing. This course will enable students to identify PRM opportunities and apply the appropriate modeling and analysis frameworks to capture them.

Course Content:

Price-response function and incremental costs. Pricing in a single or a segmented market. Pricing under supply constraints. Identifying revenue management opportunities. Capacity allocation. Network management. Overbooking. Markdown management. Customized pricing. Customer acceptance

Course Methodology:

1: Lecture by instructor, 2: Lecture by instructor with class discussion, 3: Problem-solving by instructor, 5: Problem-solving assignment,

Course Evaluation Methods:

A: Written exam,C: Take-home quiz

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Course Learning Outcomes

Learning Outcomes	Programme Learning Outcomes	Teaching Methods	Assessment Methods
1) Understand the relationship between price and demand.	1a,1b,2a,2b, 11b	1,2,3,5	A,C
2) Set the best price of a product or a set of products.	1a,1b,2a,2b, 11b	1,2,3,5	A,C
3) Understand the critical differences among different types of opportunity and the PRM approaches needed to capture them.	1a,1b,2a,2b, 11b	1,2,3,5	A,C
4) Apply PRM tools to optimally allocate capacity.	1a,1b,2a,2b, 11b	1,2,3,5	A,C
5) Understand the concepts of overbooking and network structure and apply PRM tools in such a context.	1a,1b,2a,2b, 11b	1,2,3,5	A,C
6) Systematically reduce the price of a product over time to clear out inventory	1a,1b,2a,2b, 11b	1,2,3,5	A,C
7) Understand customer reaction to different pricing schemes	1a,1b,2a,2b, 11b	1,2,3,5	A,C

Course Flow

COURSE CONTENT
Week	Topics	Study Materials
1	Introduction to Pricing and Revenue Management	Materials for the course provided by instructor
2	Optimal pricing
3	Charging different prices to different customers: Market segmentation and price differentiation
4	When the supply of a good is constrained: Pricing a segmented market with supply constraints
5	Basics of Revenue Management
6	How much capacity to allocate to each market segment?
7	The case of dependent demand: buy-up and cannibalization phenomena
8	MIDTERM EXAM
9	When airlines offer connecting flights or hotels rent rooms for multiple nights: network management
10	Selling more than available: Overbooking
11	Waiting for the sale: Markdown management
12	Approaching the customers one by one: Customized pricing
13	Customer reaction to price differentiation: Customer acceptance
14	Final exam Review

Recommended Sources

RECOMMENDED SOURCES
Textbook	Pricing and Revenue Optimization: Second Edition By Robert L. Phillips
Additional Resources	Lecture notes

Material Sharing

MATERIAL SHARING
Documents	Lecture notes and study questions
Assignments	Lecture notes and study questions
Exams	Not shareable

Assessment

ASSESSMENT
IN-TERM STUDIES	NUMBER	PERCENTAGE
Mid-Term	1	40
Final Exam	1	40
Quiz	5	20
Total		100
CONTRIBUTION OF FINAL EXAMINATION TO OVERALL GRADE		40
CONTRIBUTION OF IN-TERM STUDIES TO OVERALL GRADE		60
Total		100

Course’s Contribution to Program

COURSE'S CONTRIBUTION TO PROGRAM OUTCOMES
No	Program Learning Outcomes	check X
1a	Adequate knowledge in mathematics, science and engineering subjects pertaining to the relevant discipline,	X
1b	Ability to use theoretical and applied knowledge in these areas in complex engineering problems.	X
2a	Ability to identify, formulate, and solve complex engineering problems,	X
2b	Ability to select and apply proper analysis and modeling methods for this purpose.	X
3a	Ability to design a complex system, process, device or product under realistic constraints and conditions, in such a way as to meet the desired result,
3b	Ability to apply modern design methods for this purpose.
4a	Ability to devise, select and use modern techniques and tools needed for analyzing and solving complex problems encountered in engineering practice.
4b	Ability to employ information technologies effectively.
5a	Ability to design experiments for investigating complex engineering problems or discipline specific research questions,
5b	Ability to conduct experiments, gather data, analyze and interpret results for investigating complex engineering problems or discipline specific research questions.
6a	Ability to work efficiently in intra-disciplinary teams,
6b	Ability to work efficiently in multi-disciplinary teams,
6c	Ability to work individually.
7a	Ability to communicate effectively, both orally and in writing,
7b	Knowledge of a minimum of one foreign language,
7c	Ability to write effective reports and comprehend written reports, prepare design and production reports,
7d	Ability to make effective presentations,
7e	Ability to give and receive clear and intelligible instructions.
8a	Recognition of the need for lifelong learning, ability to access information, ability to follow developments in science and technology,
8b	Ability to continue to educate him/herself.
9a	Consciousness to behave according to ethical principles and professional and ethical responsibility.
9b	Knowledge on standards used in engineering practice.
10a	Knowledge about business life practices such as project management, risk management, change management.
10b	Awareness in entrepreneurship and innovation.
10c	Knowledge about sustainable development.
11a	Knowledge about the global and social effects of engineering practices on health, environment, and safety,
11b	Knowledge about contemporary issues of the century reflected into the field of engineering.	X
11c	Awareness of the legal consequences of engineering solutions.

ECTS

ECTS ALLOCATED BASED ON STUDENT WORKLOAD BY THE COURSE DESCRIPTION
Activities	Quantity	Duration (Hour)	Total Workload (Hour)
Course Duration	14	3	42
Hours for off-the-classroom study (Pre-study, practice, review/week)	14	3	42
Quiz	5	1	5
Midterm	1	15	15
Final Exam	1	20	20
Total Work Load			124
Total Work Load / 25 (h)			4.96
ECTS Credit of the Course			5

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