Answer Happy

As a pricing analyst the revenue management department at Air
France, you are asked to
come up with a flexible pricing algorithm for a particular daily
flight from Paris to Athens.
The flight has a list price of €80, and it is rarely fully booked
when it takes off. There is a
price-sensitive segment of the market that is willing to book this
flight more than 28 days
ahead of time. Also, there is a price-insensitive segment of the
market (business travelers)
who are willing to pay a high price for the flight if they are able
to book it close to the day of
the flight.
Given this information, you decide to use the pricing algorithm
flowcharted in Figure 17.1.
(a) When a customer requests a price for the flight, the date of
the request and the date of the
flight are inputted into the booking-curve module and the
purchase-history module.
Explain how each of these modules process that information and
describe the information
that is outputted by the purchase-history module.
(b) Describe how the algorithm calculates the business-traveler
premium.
(c) How does the algorithm combine the output of the
purchase-history module and the
business-traveler premium to arrive at a price in response to the
customer’s request.
Explain why this calculation makes sense.
(d) If the customer purchases the flight at the quoted price,
describe what the algorithm does
with that information.