Kemmer, P., Strauss, Arne and Winter, T.. (2012) Dynamic simultaneous fare proration for large-scale network revenue management. Journal of the Operational Research Society, Vol.63 (No.10). pp. 1336-1350. ISSN 0160-5682

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Abstract

Network revenue management is concerned with managing demand for products that require inventory from one or several resources by controlling product availability and/or prices in order to maximize expected revenues subject to the available resource capacities. One can tackle this problem by decomposing it into resource-level subproblems that can be solved efficiently, for example by dynamic programming. We propose a new dynamic fare proration method specifically having large-scale applications in mind. It decomposes the network problem by fare proration and solves the resource-level dynamic programs simultaneously using simple, endogenously obtained dynamic marginal capacity value estimates to update fare prorations over time. An extensive numerical simulation study demonstrates that the method results in tightened upper bounds on the optimal expected revenue, and that the obtained policies are very effective with regard to achieved revenues and required runtime.

Item Type:	Journal Article
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Warwick Business School > Operational Research & Management Sciences Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of the Operational Research Society
Publisher:	Palgrave Macmillan Ltd.
ISSN:	0160-5682
Date:	October 2012
Volume:	Vol.63
Number:	No.10
Page Range:	pp. 1336-1350
Identification Number:	10.1057/jors.2011.143
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/50094

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