Incremental discount policy for taxi fare with price-sensitive demand

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It takes some time for taxi driver to complete a requested service of passengers and the driver can attend to only one service at a time, and this distinguishes taxi service from ordinary goods. This paper deals with an incremental discount policy on the taxi fare. It is assumed that customers arrive following a Poisson process with price-sensitive arrival rates. With the objective of maximizing the average profit of taxi, a mathematical model is developed based on regenerative process. Through an analysis of the model, we show that the incremental discount policy is beneficial to the taxi company when the customer arrival rate is relatively small. Also, we propose a solution procedure to determine the optimal discount rate and price breakpoint. Finally, test problems are solved for sensitivity studies. (C) 2007 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2008-04
Language
English
Article Type
Article
Keywords

INCREASE SUPPLIERS PROFITS; QUANTITY DISCOUNT; DEPENDENT DEMAND; LOT-SIZE; MODEL

Citation

INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS, v.112, no.2, pp.895 - 902

ISSN
0925-5273
DOI
10.1016/j.ijpe.2007.08.001
URI
http://hdl.handle.net/10203/90047
Appears in Collection
IE-Journal Papers(저널논문)
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