Mathematical programming for network revenue management revisited

Mathematical programming for network revenue management revisited

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Article ID: iaor20022649
Country: Netherlands
Volume: 137
Issue: 1
Start Page Number: 72
End Page Number: 92
Publication Date: Feb 2002
Journal: European Journal of Operational Research
Authors: , ,
Keywords: programming: mathematical, simulation, yield management
Abstract:

Mathematical programming models for airline seat inventory control provide booking limits and bid-prices for all itineraries and fare classes. Williamson found 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.

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