Incorporating cancel and rebook behavior in revenue management optimization

Building on existing fare adjustment methodology for airline revenue management, this article investigates an approach to account for passenger cancel and rebook behavior. Under cancel and rebook assumptions, passengers continuously search for lower priced alternatives for their travel plans (same flights, same travel dates) until departure, and book a lower fare product if and when such a product becomes available. We propose a methodology to account for this behavior in the framework of hybrid network revenue management, and present the theory and simulation results of the benefits of this approach.