While railway transport appears well suited to revenue management (RM), establishing it in practice appears difficult. To explain this, we investigate the long-term consequences of repeated transactions and reference pricing. We consider the implications of reference pricing based on an agent-based simulation of passenger railway RM. The model is empirically calibrated using data provided by a European long-distance railway operator. On the long term, reducing fares to induce additional demand can foil revenue gains when customers learn and communicate reference prices. Accordingly, knowing customers’ tendency to build reference prices becomes crucial.
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1has studied business administration at Freie Universität Berlin. After working for Deutsche Bahn AG, he was granted a fellowship from the Path Dependency Research Centre at Freie Universität Berlin. There he finished his PhD thesis on path-dependent railway pricing in 2014. His research interests include the management of network organizations in general and the strategic sales management of transport operators in particular.
2heads the research group Advanced Analytics at RWTH Aachen University. She has pursued research on diverse aspects of revenue management since her postgraduate studies at the International Graduate School of Dynamic Intelligent Systems in Paderborn. During a stint in the industry, she worked as a revenue management consultant for Deutsche Lufthansa. She is particularly interested in applications of simulation and data analytics in revenue management, particularly with regard to customer and analyst behaviour.
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Kellermann, N., Cleophas, C. Revenue management and the railway conundrum – The consequences of reference prices in passenger railway transport practice. J Revenue Pricing Manag 14, 155–165 (2015). https://doi.org/10.1057/rpm.2015.9
- reference prices
- railway revenue management
- Prospect Theory
- customer behaviour