Customer choice, fare adjustments and the marginal expected revenue data transformation: A note on using old yield management techniques in the brave new world of pricing

Customer choice, fare adjustments and the marginal expected revenue data transformation: A note on using old yield management techniques in the brave new world of pricing

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Article ID: iaor2010245
Volume: 9
Issue: 1-2
Start Page Number: 94
End Page Number: 109
Publication Date: Jan 2010
Journal: Journal of Revenue and Pricing Management
Authors: , ,
Abstract:

We describe marginal expected revenue data transformation, a mathematical technique that facilitates optimization with customer choice models. The main focus of this article is the analytical relationship between the transformation and Expected Marginal Seat Revenue (EMSR) as applied to customer demand with choice. We present an EMSR-based approach to single-leg revenue management with price-sensitive customers. This approach can be equivalently computed using the EMSR-b heuristic but with transformed problem data. We evaluate this approach by providing numerical comparisons to other control methods.

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