%0 Journal Article
%T Optimal Pricing and Capacity Under Well-Defined and Well-Known Deterministic Demand Fluctuations | Tavor | Review of European Studies | CCSE
%J Home | Review of European Studies | CCSE
%D 2019
%R 10.5539/res.v11n2p15
%X Fluctuations in demand require diverse considerations with respect to planned capacity. At peak periods, decreased capacity may result in supply shortages and£¿£¿ thus in lower revenues and unachievable profits. £¿In contrast, smaller capacity at off-peak periods reduces the substantial costs of large and unutilized capacity.£¿£¿

The questions to be addressed ask (i) what the optimal pricing policies are at peak and off-peak periods; (ii) what the optimal capacity is for profit maximization of the supplier; and furthermore (iii) how the shifting of demands from peak to off-peak periods may reduce fluctuation and impact profits.

The present paper develops a model that compares two cases. In Case 1 it is not possible to transfer partial demand from a peak period to an off-peak period, while in Case 2 it is possible to do so.

The comparison between the cases illustrates various results, some of which are less intuitive than others. For instance, a larger gap between the peak and off-peak periods leads to a larger optimal capacity in Case 1 than in Case 2. However, a smaller gap presents a different picture. When there is less willingness to switch demand between the periods, the capacity of Case 2 is larger than that of Case 1.
%U http://www.ccsenet.org/journal/index.php/res/article/view/0/39107