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Mathematical programming models for revenue management under customer choice

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  • Chen, Lijian
  • Homem-de-Mello, Tito
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    Abstract

    We study a network airline revenue management problem with discrete customer choice behavior. We discuss a choice model based on the concept of preference orders, in which customers can be grouped according to a list of options in decreasing order of preference. If a customer's preferred option is not available, the customer moves to the next choice on the list with some probability. If that option is not available, the customer moves to the third choice on the list with some probability, and so forth until either the customer has no other choice but to leave or his/her request is accepted. Using this choice model as an input, we propose some mathematical programs to determine seat allocations. We also propose a post-optimization heuristic to refine the allocation suggested by the optimization model. Simulation results are presented to illustrate the effectiveness of our method, including comparisons with other models.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 203 (2010)
    Issue (Month): 2 (June)
    Pages: 294-305

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    Handle: RePEc:eee:ejores:v:203:y:2010:i:2:p:294-305

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Discrete choice Revenue management Preference order;

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    Cited by:
    1. Joern Meissner & Arne Strauss, 2008. "Network Revenue Management with Inventory-Sensitive Bid Prices and Customer Choice," Working Papers MRG/0008, Department of Management Science, Lancaster University, revised Apr 2010.
    2. Joern Meissner & Arne Strauss, 2010. "Improved Bid Prices for Choice-Based Network Revenue Management," Working Papers MRG/0016, Department of Management Science, Lancaster University, revised Jan 2010.

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