Scalable Dynamic Bid Prices for Network Revenue Management in Continuous Time

Scalable Dynamic Bid Prices for Network Revenue Management in Continuous Time

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Article ID: iaor201529034
Volume: 24
Issue: 10
Start Page Number: 1621
End Page Number: 1635
Publication Date: Oct 2015
Journal: Production and Operations Management
Authors: ,
Keywords: supply & supply chains, networks, decision, heuristics
Abstract:

This study develops an approximate optimal control problem to produce time‐dependent bid prices for the airline network revenue management problem. The main contributions of our study are the analysis of time‐dependent bid prices in continuous time and the use of splines to modify the problem into an approximate second‐order cone program (ASOCP). The spline representation of bid prices permits the number of variables to depend solely on the number of resources and not on the size of the booking horizon. The advantage of this framework is the ASOCP's scalability, which we demonstrate by solving for bid prices on an industrial‐sized network. The numerical experiments highlight the ASOCP's ability to solve industrial sized problems in seconds.

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