Theorem of Yield Management

The Theorem of Yield Management states that a service provider can maximize revenue by dynamically adjusting prices and availability based on customer demand and booking patterns. Essentially, it involves predicting which customers are willing to pay more and directing resources, such as seats or rooms, to those higher-paying customers while filling remaining capacity with lower-priced options. This approach balances supply and demand efficiently, ensuring the service is not underutilized or overpriced, ultimately increasing profitability by selling the right product to the right customer at the right time.