Author
Korkmaz, Mehmet Selçuk, Kundakcıoğlu, Ömer Erhun, Sivrikaya, O.
Publication Date
2022-02-27
Publication Place
-
Springer
Subject
Airline operations, Inventory allocation, Nonhomogeneous poisson process, Revenue management
Type
Periodical
Language
English
Digital
Yes
Manuscript
No
Library
Özyeğin University
Library Asset ID
1476-6930
Record ID
98d6ac67-ade7-4972-b40f-630e23f3ca6a
Library Location
Industrial Engineering
Date
2022-02-27
Sample Text
Fare allocation for legs and O&D pairs plays a crucial role in airline revenue management. Despite a large number of dynamic pricing studies, there are only a few widely adopted studies in which assumptions affect most tactical decisions with potentially large impacts on airline profitability. These decisions involve approximating future pricing schemes, allocation of fare classes, and setting booking limits. We propose a fare allocation model for a single leg in the presence of a realistic nonhomogeneous Poisson demand with an increasing rate. We aim to compute when and how to markup the price for an airfare product (switch to an upper fare class) to maximize the expected revenue. We study a fluid approximation of the underlying stochastic problem considering independent demand from each customer segment and examine different properties that lead to several important insights. Finally, we propose a dynamic look-ahead pricing scheme to compare our fluid approximation results against the well-known EMSRb heuristic and a dynamic programming solution on randomly generated booking request data. Numerical examples illustrate the effectiveness of our proposed approach.
DOI
10.1057/s41272-021-00284-4
Cilt
21
