Abstract
In Chap. 5, the benefits which dynamic pricing mechanisms hold for providers as well as customers were pointed out. Though already commonly used in practice both market participants are faced with certain risks: Web service providers face the risk of low incomes in times of (unexpected) low utilization and demand, and are thus forced to lower their prices accordingly in order to keep up with their competitors. This may result in considerable losses. On the other hand, Web service customers may run into situations where, despite of a high willingness to pay, cannot fulfill their demand in peak times. While for the provider this dilemma has mainly direct economic consequences only, it can become a more serious issue to the customers than only high costs.
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Notes
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- 2.
- 3.
There is no need to specific this market mechanism in any more detail as only the price is relevant for the derivative model.
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The term revenue management is omitted here. Though some authors see slight differences between the two terms of yield and revenue management, this section follows the general notion of most academic papers treating them equally.
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This is in contrast to many today’s reservation systems, for example, in the airline industry, where it is still possible to make these kind of requests completely anonymous.
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This holds almost surely, as for any given value of α the probability of ρ( ⋅) taking a value so that the property does not hold, is zero. With both α and ρ in [0, 1] this would only hold for α = 0 and ρ = 1.
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Weinhardt, C., Blau, B., Conte, T., Filipova-Neumann, L., Meinl, T., Michalk, W. (2011). Web Services Advanced Reservation Contracts. In: Business Aspects of Web Services. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-22447-8_8
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