Article ID: | iaor20011917 |
Country: | United States |
Volume: | 46 |
Issue: | 6 |
Start Page Number: | 760 |
End Page Number: | 775 |
Publication Date: | Jun 2000 |
Journal: | Management Science |
Authors: | Ryzin Garrett van, McGill Jeff |
Keywords: | management, adaptive processes, yield management |
We investigate a simple adaptive approach to optimizing seat protection levels in airline revenue management systems. The approach uses only historical observations of the relative frequencies of certain seat-filling events to guide direct adjustments of the seat protection levels in accordance with the optimality conditions of Brumelle and McGill. Stochastic approximation theory is used to prove the convergence of this adaptive algorithm to the optimal protection levels. In a simulation study, we compare the revenue performance of this adaptive approach to a more traditional method that combines a censored forecasting method with a common seat allocation heuristic (EMSR-b).