Revenue Management

CHAPTER 3

Introduction to Financial Analysis of Revenue Management Decisions

Management accounting and economics provide many of the tools needed to analyze revenue management proposals. In this chapter, we introduce several concepts and techniques. Chapter 7 provides further discussion.

Revenue management had its beginnings in an environment where added revenue was considered equivalent to added profit. The airline industry, credited as the originator of revenue management, had a cost structure that included substantially all fixed costs. Thus, any increases in revenue from selling seats that would otherwise be empty was deemed to fall almost entirely to the pretax bottom line. Further, the motivation for the initial application of revenue management ...