Modeling revenue yield of reservation systems that use nested capacity protection strategies

Modeling revenue yield of reservation systems that use nested capacity protection strategies

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Article ID: iaor20071970
Country: Netherlands
Volume: 104
Issue: 2
Start Page Number: 340
End Page Number: 353
Publication Date: Jan 2006
Journal: International Journal of Production Economics
Authors: , ,
Keywords: markov processes, yield management, demand
Abstract:

Airline reservation systems involve the use of booking policies to implement a predetermined allocation of seats to different fare classes. Models for optimal allocation of seats typically assume one of two commonly used booking policies, often without recognizing the differences between them. In this paper, we present alternative representations of these booking policies, and demonstrate that even with identical seat allocations the two booking policies may result in different expected revenues. We also show conditions under which one of the policies is better. Our Markov chain models facilitate optimization of seat allocations given either booking policy. Examples are given.

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