The Theory of Yield Management

Yield management is a strategy used by businesses to maximize revenue by adjusting prices based on demand, capacity, and market conditions. It involves analyzing when customers are willing to pay more or less and managing inventory—such as seats on a flight or hotel rooms—accordingly. By forecasting demand and dynamically pricing, companies can sell the right product to the right customer at the right time and price, ensuring they optimize revenue even during fluctuations in demand. This approach is common in industries like airlines, hotels, and car rentals to improve profitability and resource utilization.