An option‐based approach for pricing perishable services assets
- 1 December 1998
- journal article
- Published by Emerald in Journal of Services Marketing
- Vol. 12 (6), 473-483
- https://doi.org/10.1108/08876049810242759
Abstract
The concept of option pricing is used to develop an alternative model for pricing services that have a fixed availability and expiration. The binomial option pricing model and abandonment theory are financial models used to demonstrate that the option to cut price contributes positively to a service’s expected profitability. Pricing of hotel rooms is used to demonstrate in a marketing context the use of this option model approach. Airline seats, events, and vacation house rentals are some of the many other alternative applications among consumer services, as broadcast time is a similar example among industrial services.Keywords
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