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2007 | Book

A Revolution in the Making Read chapter Read first chapter

The Future of Pricing

How Airline Ticket Pricing Has Inspired a Revolution

Author: E. Andrew Boyd

Publisher: Palgrave Macmillan US

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

A story about science, technology, and people, The Future of Pricing provides an inside look at how airlines price tickets and how practices developed in the airline industry are now revolutionizing the world of pricing. This book is written for business professionals and students wanting to better understand the rapid growth of scientific pricing.

Table of Contents

Frontmatter
Chapter 1. A Revolution in the Making
Abstract
What’s the right price for a bar of soap? Nothing fancy, just the soap we reach for in the shower every morning, or bathe our children with before we put them to bed.
E. Andrew Boyd
Chapter 2. Method or Madness?
Abstract
It’s not a hobby, really, nor a preoccupation. It’s an all-out obsession.
E. Andrew Boyd
Chapter 3. The Computer Did It
Abstract
Scientific pricing wasn’t something airlines envisioned as commercial aviation took shape in the 1920s. Far from it. Eddie Rickenbacker, a celebrated World War I flying ace, raced cars before purchasing and running Eastern Airlines in 1938. Cyrus Rowland Smith, an early president of American Airlines, was known simply as “C. R.,” the hard drinking salesman from Texas. These certainly weren’t people you’d expect to scour universities looking for the world’s brightest pricing scientists.
E. Andrew Boyd
Chapter 4. How It All Works
Abstract
The late 1980s were an exceptionally good period for director Oliver Stone. Winning Academy Awards as best director for the films Platoon (1986) and Born on the Fourth of July (1989), Stone won accolades but was ultimately passed over for the equally provocative film Wall Street (1987) in which he analyzes the inner workings of fictional corporate raider Gordon Gekko. Michael Douglas, who won the Academy Award for best actor portraying Gekko, captures the no-holds-barred capitalistic spirit of the film with his shocking but memorable line, “Greed, for lack of a better word, is good.”
E. Andrew Boyd
Chapter 5. When Passengers Collide
Abstract
The rationale behind hub-and-spoke flight networks is simple enough. There may not be enough people wanting to fly from Spokane, Washington, to Fargo, North Dakota, to warrant a daily flight. However, there may be plenty of people who want to fly to Fargo from somewhere in the United States. If they’re all gathered at one location and flown to Fargo together, the flight from this hub city to Fargo can be filled.
E. Andrew Boyd
Chapter 6. Hold Me, Darlin’
Abstract
The 2005 World Poker Tour Championship took place over a stretch of seven days in late April at the Bellagio casino in Las Vegas. With 452 entrants putting up $25,000 a piece for the right to play, the total purse for the competition came to over $11 million. The winner would take home almost $3 million, one of the largest prizes in the history of tournament poker.
E. Andrew Boyd
Chapter 7. Upon Arrival: Hotels, Rental Cars, Cruise Ships, and More
Abstract
People in America like to travel. With annual expenditures of $1.3 trillion on travel and tourism, $1 out of every $10 dollars accounted for in the gross domestic product goes toward getting somewhere, staying somewhere, and doing business or having fun while there. We take planes, trains, cars, buses, and boats. We use hotel rooms at an average of two and a half million per day. We shop, visit historical sites, play at theme parks, gamble in casinos, eat in restaurants, engage in athletics, and treat our bodies to rejuvenating spa therapies. Along the way, we generate over $100 billion in tax revenue.
E. Andrew Boyd
Chapter 8. The Just Price
Abstract
It happened during one of our family trips to eastern Washington. Two parents, two kids, one dog, and a station wagon, we were the statistically correct 1960s family. My father didn’t like to waste vacation time and preferred leaving the San Francisco Bay area in the afternoon and driving all night. It was late in the evening. My mother was dozing in the front seat; my younger sister was asleep in the back with the suitcases. I couldn’t sleep, and as I sat stroking the head of our white German Shepherd, I was in a thoughtful mood. My father was going to pay for it.
E. Andrew Boyd
Chapter 9. The Scientists
Abstract
Rumor is that Las Vegas won’t have them anymore. As a group, they don’t gamble enough. When they do gamble, they don’t lose enough money. When they play blackjack, one of the few games in which a player can actually turn the odds against the house, pit bosses watch warily for any of the telltale signs that they’re mercilessly taking advantage of an irregular run of cards.
E. Andrew Boyd
Chapter 10. The State of Pricing
Abstract
Working as a professor in an engineering school isn’t the ivory tower experience most people envision. True, teaching can be very rewarding and nobody tells you what you’re supposed to research. But unlike professors in law schools or schools of the humanities, engineering professors are required to attract money: money to pay for equipment, money to pay for student tuition and stipends, and money to pay for a reduced teaching load. All in all, it’s a healthy arrangement, providing professors with motivation to work on problems of relevance, since there’s a strong correlation between what people want researched and what they’re willing to pay for. However, sometimes the job seems more like a position in sales than in teaching and research.
E. Andrew Boyd
Chapter 11. Pricing’s Many Faces
Abstract
The world of science is home to equations that are as famous as Harrison Ford is to the world of Hollywood. Many of the equations require advanced courses in mathematics to understand, but others derive fame from their very simplicity. Science is often associated with complexity, but in reality, scientists and mathematicians cherish simplicity. The highest praise one mathematician can offer another is captured in the word elegant. Elegant is used to describe the proof of a very difficult result in a creative and brief manner. Proofs that go on for hundreds of pages, even if wielding powerful mathematical machinery, are not considered elegant and do not receive the same praise as a five page proof of the same result. Of course, results with a proof that’s too brief and that doesn’t rely on some pillar of the mathematical edifice are at risk of being obvious, even if the proof took years to discover. Obvious cuts deeply into the ego, and is only surpassed by “there’s an error in your logic.” Many a mathematician has been cast into a state of despair when a senior colleague has declared a result obvious, and many pitchers of beer have been consumed debating whether or not a particular result is or isn’t in the dreaded category.
E. Andrew Boyd
Chapter 12. The Coming Revolution
Abstract
Nicolaus Copernicus (1473–1543) was many things—diplomat, soldier, economist, mathematician—but he is best known for his work as an astronomer, and in particular, for proposing a heliocentric theory of the solar system. Geocentrism, which places the earth at the center rather than the sun, had long been the predominant viewpoint for the simple reason that it was obvious. The earth wasn’t moving.
E. Andrew Boyd
Backmatter
Metadata
Title
The Future of Pricing
Author
E. Andrew Boyd
Copyright Year
2007
Publisher
Palgrave Macmillan US
Electronic ISBN
978-0-230-60690-6
Print ISBN
978-1-349-36959-1
DOI
https://doi.org/10.1057/9780230606906