A seat inventory management model in the presence of dependent demands

A seat inventory management model in the presence of dependent demands

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Article ID: iaor20106466
Volume: 27
Issue: 2
Start Page Number: 161
End Page Number: 170
Publication Date: Apr 2010
Journal: Korean Management Science Review
Authors:
Keywords: yield management
Abstract:

When airlines sell the same seats on an air flight at different fares, demand for a fare class depends on demand for other fare classes due to demand dependency. Demand dependencies occur when customers will buy other fare class tickets if the originally requested fare were unavailable, or when customers postpone their purchase decisions in anticipation of reopening of the lower fare in the next period. Demand dependency as a result customer buying behavior has a considerable profit implication, which was ignored in many earlier studies. We investigate the impact of demand dependency on the optimal booking limits and the expected revenues under a single-period and a two-period setting. We show how to find optimal booking limits of the problem and provide numerical examples to illustrate the impact.

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