Dynamic pricing of high-speed rail with transport competition

In recent years, high-speed rails (HSR) have received strong attention in the transport market because of the growing competition with air transport. In this article, we present a revenue management model of dynamic pricing for a competitive route. We suppose that the passengers are allowed to choose among other transport modes and that each transport mode offers the multiple substitutable schedules. In addition, the cancellation, no-show and overbooking are incorporated in our model. Using the multinomial logit model to describe the customer's discrete choice, we derive an optimal pricing policy so as to maximize the expected total revenue for substitutable schedules for HSR. Furthermore, we obtain some analytical properties for the optimal price. Finally, we present several numerical results to show the effect of competition on pricing strategies.