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Optimal pricing and seat allocation for a two-cabin airline revenue management problem

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  • Kyparisis, George J.
  • Koulamas, Christos

Abstract

We consider the single-flight leg two-cabin airline revenue management problem in which there is a flexible partition of the business and economy cabins and determine the optimal cabin partition and the optimal fares for both cabins with both a general and an isoelastic multiplicative price-demand function and three different random demand distributions. We conclude numerically that the optimal partitioning and the optimal pricing is not sensitive to the random demand distributions and that our findings are comparable for two different aircraft types. We also consider the similar problem with a capacity constraint on business and conclude that this constraint drives business class fares up and total revenue down (compared to the unconstrained problem).

Suggested Citation

  • Kyparisis, George J. & Koulamas, Christos, 2018. "Optimal pricing and seat allocation for a two-cabin airline revenue management problem," International Journal of Production Economics, Elsevier, vol. 201(C), pages 18-25.
    • Handle: RePEc:eee:proeco:v:201:y:2018:i:c:p:18-25
    DOI: 10.1016/j.ijpe.2018.04.021
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