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Assessing fairness of selfish revenue sharing mechanisms for airline alliances

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  • Çetiner, D.
  • Kimms, A.
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    Abstract

    Airline alliances offer flights including flight legs operated by different airlines. A major problem is how to share the revenue obtained through selling a flight ticket among the airlines in a fair way. Recently, Kimms and Çetiner [1] have proposed fair revenue allocations based on the solution concept nucleolus, which assumes that the decisions of the alliance are given centrally. However, in an alliance, each airline has a selfish behavior and tries to maximize its own revenue. The contribution of this paper is twofold. First, we provide a method to evaluate the fairness of revenue sharing mechanisms applied in a selfish setting. The method includes a simulation model for the booking process of the alliance and uses the nucleolus-based allocations as benchmark. Second, we develop a revenue sharing mechanism based on the transfer of dual prices. The fairness of the new mechanism and several other existing approaches is assessed through a numerical study.

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    Bibliographic Info

    Article provided by Elsevier in its journal Omega.

    Volume (Year): 41 (2013)
    Issue (Month): 4 ()
    Pages: 641-652

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    Handle: RePEc:eee:jomega:v:41:y:2013:i:4:p:641-652

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    Keywords: Revenue management; Revenue sharing; Airline alliance; Fairness; Selfish behavior;

    References

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    1. Kimms, Alf & Çetiner, Demet, 2012. "Approximate nucleolus-based revenue sharing in airline alliances," European Journal of Operational Research, Elsevier, vol. 220(2), pages 510-521.
    2. Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
    3. de Boer, Sanne V. & Freling, Richard & Piersma, Nanda, 2002. "Mathematical programming for network revenue management revisited," European Journal of Operational Research, Elsevier, vol. 137(1), pages 72-92, February.
    4. Graf, M. & Kimms, A., 2011. "An option-based revenue management procedure for strategic airline alliances," European Journal of Operational Research, Elsevier, vol. 215(2), pages 459-469, December.
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    Cited by:
    1. Grauberger, W. & Kimms, A., 2014. "Computing approximate Nash equilibria in general network revenue management games," European Journal of Operational Research, Elsevier, vol. 237(3), pages 1008-1020.

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