Mathematical programming for network revenue management revisited

Mathematical programming models for airline seat inventory control provide booking limits and bid-prices for all itineraries and fare classes. E.L. Williamson [Airline network seat inventory control: methodologies and revenue impacts, Ph.D. thesis, Massachusetts Institute of Technology, Cambridge, M...

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Bibliographic Details
Published in:European journal of operational research 2002-02, Vol.137 (1), p.72-92
Main Authors: de Boer, Sanne V, Freling, Richard, Piersma, Nanda
Format: Article
Language:English
Subjects:
Airline scheduling
Inventory control
Inventory management
Mathematical programming
Operations research
Revenue management
Simulation
Studies
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Summary:Mathematical programming models for airline seat inventory control provide booking limits and bid-prices for all itineraries and fare classes. E.L. Williamson [Airline network seat inventory control: methodologies and revenue impacts, Ph.D. thesis, Massachusetts Institute of Technology, Cambridge, MA, 1992] finds that simple deterministic approximation methods based on average demand often outperform more advanced probabilistic heuristics. We argue that this phenomenon is due to a booking process that includes nesting of the fare classes, which is ignored in the modeling phase. The differences in the performance between these approximations are studied using a stochastic programming model that includes the deterministic model as a special case. Our study carefully examines the trade-off between computation time and the aggregation level of demand uncertainty with examples of a multi-leg flight and a single-hub network.
ISSN:0377-2217
1872-6860
DOI:10.1016/S0377-2217(01)00096-0