Article ID: | iaor200943715 |
Country: | United Kingdom |
Volume: | 5 |
Issue: | 2 |
Start Page Number: | 94 |
End Page Number: | 101 |
Publication Date: | Jul 2006 |
Journal: | Journal of Revenue and Pricing Management |
Authors: | Walczak Darius |
Keywords: | programming: dynamic |
Practitioners sometimes show reluctance to apply DP models in Revenue Management citing difficulty in modeling high–variance, real–life customer demand. We propose a method to address that issue by suitably increasing variance in a popular Poisson demand model and then slightly generalizing the DP formulation while keeping desired structural properties intact. We include numerical examples for a discrete–time approximation to Poisson–distributed demand.