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Mathematical Problems in Engineering
Volume 2015, Article ID 836434, 8 pages
http://dx.doi.org/10.1155/2015/836434
Research Article

Dynamic Pricing for Airline Revenue Management under Passenger Mental Accounting

School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China

Received 10 August 2014; Accepted 2 December 2014

Academic Editor: Fazal M. Mahomed

Copyright © 2015 Yusheng Hu et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Mental accounting is a far-reaching concept, which is often used to explain various kinds of irrational behaviors in human decision making process. This paper investigates dynamic pricing problems for single-flight and multiple flights settings, respectively, where passengers may be affected by mental accounting. We analyze dynamic pricing problems by means of the dynamic programming method and obtain the optimal pricing strategies. Further, we analytically show that the passenger mental accounting depth has a positive effect on the flight’s expected revenue for the single flight and numerically illustrate that the passenger mental accounting depth has a positive effect on the optimal prices for the multiple flights.