Objective - I am building a dynamic pricing tool for airline tickets which will consider the competitor prices. Taking competitor price as reference, this tool will price the ticket. Also instead of price simultaneously need to follow the lead player in the market and price the ticket.

In the research found out two models

  1. Bertrand Model 2) Stackelberg Model

As per my knowledge Bertrand model is competing on prices and stackelberg competing with quantities.

As airline is a industry which has capacity constraints (i.e can't compete on quantities), I have mainly two queries related to stackelberg model

1). can I use stackelberg(leader-follower) model/concept, if need to compete with prices instead of quantities.

2). Can stackelberg be used with multiple leaders (more than 2) ?

3). Or Is there any combination of both models for example something called bertrand-stackelberg

Can anyone help with insights. Thanks in advance

  • $\begingroup$ Both of these are intro to econ toy models assuming homogeneous goods and perfect information. Because of this, they are rarely useful in real world pricing. $\endgroup$
    – Giskard
    May 12 at 17:02
  • $\begingroup$ Can you please suggest some good model that be useful in real world pricing.@Giskard $\endgroup$
    – sujithDas
    May 13 at 2:10
  • $\begingroup$ Unfortunately, I cannot. I recommend editing your question / posting a new question, because the focus has shifted significantly. Hopefully someone else will give come along to give you some insight. $\endgroup$
    – Giskard
    May 13 at 6:18

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