The Future of Pricing: How Airline Ticket Pricing Has Inspired a Revolution

205 Pages·2007·1.07 MB·English

by  E. Andrew Boyd

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The Future of Pricing
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The Future of Pricing
How Airline Ticket Pricing Has Inspired a Revolution
E. Andrew Boyd
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The Future of Pricing
Copyright © E. Andrew Boyd, 2007.
All rights reserved. No part of this book may be used or reproduced in any manner what-
soever without written permission except in the case of brief quotations embodied in criti-
cal articles or reviews.
First published in 2007 by
PALGRAVE MACMILLAN™
175 Fifth Avenue, New York, N.Y. 10010 and
Houndmills, Basingstoke, Hampshire, England RG21 6XS.
Companies and representatives throughout the world.
PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan
division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a regis-
tered trademark in the United States, United Kingdom and other countries. Palgrave is a
registered trademark in the European Union and other countries.
ISBN-13: 978-0-230-60019-5
ISBN-10: 0-230-60019-0
Library of Congress Cataloging-in-Publication Data
Boyd, E. Andrew.
The future of pricing : how airline ticket pricing has inspired a revolution / E. Andrew
Boyd.
p. cm.
Includes bibliographical references and index.
ISBN 0-230-60019-0 (alk. paper)
1. Airlines—Rates. 2. Airlines—Prices. 3. Transportation—Tickets. 4. Pricing. I. Title.
HE9783.5.B69 2007
387.712—dc22 2007003837
A catalogue record of the book is available from the British Library.
Design by Scribe, Inc.
First edition: Novemeber 2007
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
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For my sister, mother, and father.
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Contents
Acknowledgments ix
Preface xi
1 A Revolution in the Making 1
2 Method or Madness? 7
3 The Computer Did It 23
4 How It All Works 43
5 When Passengers Collide 57
6 Hold Me, Darlin’ 67
7 Upon Arrival: Hotels, Rental Cars, Cruise Ships, and More 85
8 The Just Price 103
9 The Scientists 117
10 The State of Pricing 135
11 Pricing’s Many Faces 147
12 The Coming Revolution 165
Appendix 177
Reference List 179
Index 187
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Acknowledgments
The agents I spoke with while preparing The Future of Pricingwanted me
to write either a professional memoir or a “guru” book—a book in which
I presented myself as a leading authority on pricing. A memoir was inap-
propriate because the goal wasn’t to tell a story about my professional life. A
guru book was out as well. I’m not a guru. I’m an observer and participant who
was fortunate enough to find himself in a fascinating place at a fascinating
time. While I like to think I’ve made valuable contributions to the field of
pricing—both mathematically and managerially—scientific pricing is the
result of the contributions of many different individuals. (I can thank the
agents for convincing me that it was okay to use “I” in a sentence and to share
personal experiences.)
I would like to thank every pricing and revenue management professional I’ve
worked with, conversed with, or read the writings of. Each has contributed to
this book in his or her own way. While it would be impossible to list everyone by
name, there are a few individuals I would like to recognize explicitly: Chris
Anderson, Peter Bell, Peter Belobaba, Bill Cooper, Bob Cross, Renwick Curry,
Guillermo Gallego, Tito Homem-de-Mello, Itir Karaesmen, Sherri Kimes,
Anton Kleywegt, Warren Lieberman, Jeff McGill, Georgia Perakis, Laura Preslan,
Bob Phillips, Richard Ratliff, Rob Shumsky, Barry Smith, Larry Weatherford,
and Ciyou Zhu. Special thanks to Karl Isler, Kalyan Talluri, and Garrett van
Ryzin, all of whom had a tremendous impact on shaping my thoughts.
Many people contributed to this book by providing information or sitting for
an interview. Thanks to Steve Bondi, Bill Brunger, Tom Cook, Neil Corbett,
Dave Cripe, Lee Davis, J. D. Dick, Andy Doyle, Bill Dudziak, John Evler,
Stacy Foree, Daryn Herrington, Bill Hinke, Phi Hoang, Pete Horner, Jerry
Jung, Jeff Kabin, Leon Kinloch, Steve Klein, Vern Lennon, Barry List, Greg
Lough, Al Ludwig, Irv Lustig, Steve Macadam, Pat McCord, Chuck McElrea,
Denise Minier, Steve Neubert, Graham Parker, Steve Pinchuk, Todd Plage,
John Quillinan, Beju Rao, John Riddell, Mike Rothkopf, Mark Shafer, Martin
Simoncic, Manny Sousa, Benson Yuen, and Jim Ziminski. Special thanks to