ABSTRACT
The most famous examples where dynamic pricing/price optimization is regularly used stem from the service industry and include hotels, airlines and cruise ships. However, the principles of price optimization with capacity constraints are equally relevant for other service businesses. Next, the demanded quantity at each price level, for the various sub-periods, should be organized in a table and then depicted in a scatter plot. This will help us evaluate what price–response function that may fit the data well. The weekend demand data seem to be fairly linear and a linear price–response function may be a good fit, at least in the relevant area of the curve. The reason is that this is the quantity sold at the profit-maximizing unconstrained price. Hence, increasing the capacity beyond this level has no value, and the marginal opportunity cost is zero.
