CHAPTER 7
Additional Tools for Analysis of Revenue Management Decisions
In this chapter, we first revisit the topic of contribution margin analysis. A classic case is used to illustrate the limitations of this methodology. We then consider the economic tool of analysis of price elasticity. Finally, we discuss willingness to pay as a factor in the analysis of revenue management decisions.
The Special Order Problem
Special order problems are used in managerial accounting as a common illustration of the application of contribution margin analysis for revenue management decisions. The problem is characterized as an opportunity for additional business coupled with a reduction from usual prices. This is a common format for many revenue management decisions: ...
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