Math Is Fun Forum

tripleb

Member

Registered: 2007-06-26

Posts: 2

Formula for Discount Scheme

Hi,

I would like to know if any of you could help me. I was wondering if there is a certain formula that can be applied to a business similar to the airline industry's discount airfares. I was wondering how it would be possible to come up with a certain formula wherein you could just plug in the prices and discounts but are able to come up with profit but still be competitive in price.  For example, is there such a formula for those types of schemes wherein the earlier you book and buy your tickets, the cheaper your airfare rate would be.. and thus, the closer to the flying date you purchase, the more expensive your ticket will be.  Is it possible to come up with such a formula or is there an existing one? I am not that great in math so i hope you could help me with this. Thanks! Any input would be well appreciated.

Looking forward to your response.:)

Laterally Speaking

Real Member

Registered: 2007-05-21

Posts: 356

Re: Formula for Discount Scheme

Well, as far as I can tell (by experience), the airlines' system is not really disclosed. I'll try looking into this (I'll check the prices on different dates to the same place), but it could also be based on the amount of (predicted) traffic the day of the flight.

Of course, there are other industries that use similar schemes, but the airlines are a good example.

---

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JaneFairfax

Member

Registered: 2007-02-23

Posts: 6,868

Re: Formula for Discount Scheme

The earlier you book, the less you pay … an exponential formula comes to mind.

Suppose P[sub]0[/sub] is the price customers have to pay if flying on the same day. If P(t) is the price they have to pay if they book t days in advance, I would suggest

where α is a something you can vary depending on how sharply or gently you want prices to vary with advanced booking; the larger the value of α, the more sharply prices will fall off. For example, let’s take P[sub]0[/sub] = $100 and α = 0.1. The following table shows the prices payable for days booked in advance

If you increase α to 0.2, the prices fall off more sharply:

On the other hand, decreasing α to 0.05 will cause the prices to trail off more gently:

JaneFairfax

Member

Registered: 2007-02-23

Posts: 6,868

Re: Formula for Discount Scheme

Well, as far as I can tell (by experience), the airlines' system is not really disclosed. I'll try looking into this (I'll check the prices on different dates to the same place), but it could also be based on the amount of (predicted) traffic the day of the flight.

Of course, there are other industries that use similar schemes, but the airlines are a good example.

I might be wrong but I think Tribleb is working for an airlines company and is just asking for some help on the mathematical side of the job.

Last edited by JaneFairfax (2007-06-26 02:24:58)

tripleb

Member

Registered: 2007-06-26

Posts: 2

Re: Formula for Discount Scheme

Hi guys!

Thanks for the response. Jane, thanks for your formula... need to ask you though... since I am not good in Math, I've been trying to solve the equations or formulas you gave me but i can't seem to understand what e is or P... i can't derive the same thing you got when i plug in the nos..   last time i checked, i didn't work in the airline industry.. but who knows... if it's viable, why not