Modeling the customer arrival process and comparing decision rules in perishable asset revenue management situations

A model for customer arrivals is presented that allows evaluation of different decision rules in perishable asset revenue management (PARM) situations. The model is used to derive probabilities necessary to operationalize the implementation of an optimal decision rule for PARM problems with diversion and two price classes. Heuristic approaches are compared to the proper closing out of price classes to see how much of an improvement can be made in expected contribution. The sensitivity of the difference in expected contribution between these rules is tested relative to changes in the model’s input parameters. Managerial insights are presented.