This paper presents the research undertaken for the development of price reduction factors for density-deficient asphalt pavements. Performance characteristics included in this study are fatigue cracking and rutting. The following laboratory tests were performed on two North Carolina Superpave mixtures with varying air void contents: (1) axial compression dynamic modulus tests for modulus determination; (2) indirect tension tests for fatigue performance evaluation; (3) triaxial repeated load permanent deformation tests for rutting evaluation; and (4) accelerated pavement tests on laboratory pavement slabs for fatigue and rutting evaluation using the third-scale Model Mobile Loading Simulator (MMLS3). Air void models for the dynamic modulus, fatigue cracking, and rutting were developed using the laboratory test data. These models and the results from the MMLS3 testing were used to develop the price reduction factors for density-deficient asphalt mixtures. In order to determine the effect of deficient density of hot-mix asphalt (HMA) on the performance of asphalt pavement as a system, a computer program called AP4 (Asphalt Pavement Performance Prediction Program) was developed. The algorithm adopted in AP4 for the damage calculation is based on the incremental damage concept and is very similar to that used in the National Cooperative Highway Research Program (NCHRP) 1-37A Mechanistic-Empirical Pavement Design Guide. This program allows the determination of the service life for fatigue cracking and rutting based on the inputs of air void contents in all the HMA layers. Case studies of five density-deficient pavements were conducted, and the price reduction factors were determined.