Differentiation, self-selection and revenue management

Abstract

This paper takes an interdisciplinary approach towards revenue management, incorporating economics and marketing concepts and proposing that firms employ a dynamic service differentiation so that consumer needs are met more closely. To locate market segments, the paper proposes that firms employ segmentation based on self-selection, providing consumers with an array of choices that are truth revealing and allowing firms to price discriminate without the need to predetermine segments. Through differentiation and self selection, uncertainty could also be reduced. Furthermore, self selection could also allow firms to reduce the costs of coordinating and monitoring rate fences.