Revenue Management and Survival Analysis in the Automobile Industry

Revenue Management and Survival Analysis in the Automobile Industry

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Today, the automobile industry is faced by increasing price competition while profit margins are shrinking. The used car sector is affected the most, amplified by excess supply in day registrations and the impact of the continuing rebate war in the new car sector. AndrAc Jerenz develops a price-based revenue management framework to support retailers in establishing better and more profitable pricing strategies, including assigning an initial asking price and the adjustment of price over time. For the profit maximization problem of a used car retailer, the author derives different algorithms for determining optimal strategies by applying stochastic control theory. Within the scope of the demand forecasting component, he proposes the adoption of survival analysis for estimating individual price response functions, modeled by parametric and semi-parametric survival functions. Thus, the effects of variables such as the asking price are taken into account. The evaluation of data from a case study in the German used car market reveals a significant potential for an increase in profitability and confirms the proposed price-based revenue management concept.7) notice, the usage of this abstract term might be problematic. An example of the lack of flexibility in capacity is illustrated by the hotel industry. ... Marginal costs are relatively low for selling a hotel room that is available, but the costs of increasing the capacity of the hotel are ... between a time-sensitive business traveler and a pricesensitive leisure customer by asking higher prices as more time elapses.

Title:Revenue Management and Survival Analysis in the Automobile Industry
Author:Prof. Dr. Ulrich Tüshaus, André Jerenz
Publisher:Springer Science & Business Media - 2008-08-01


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