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A simulation study: comparing the Markov decision process approach to the expected marginal seat revenue b heuristic under differing demand behaviour

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  • Michael Frank
  • Martin Friedemann
  • Anika Schroder

Abstract

In this article, we compare Markov Decision Process (MDP) to expected marginal seat revenue b (EMSRb) under realistic demand behaviour by implementing both in a stochastic simulation model. First come first served as well as an upper bound, serves for reference. We give a short explanation of the investigated methods, describe the simulation setup, in particular the demand model, and carry out sensitivity analyses regarding settings of the demand generator and the optimisation methods. Computational results show that MDP outperforms EMSRb in all investigated scenarios but we raise the question how much improvement is needed to justify the additional effort of the more complicated procedure.

Suggested Citation

  • Michael Frank & Martin Friedemann & Anika Schroder, 2009. "A simulation study: comparing the Markov decision process approach to the expected marginal seat revenue b heuristic under differing demand behaviour," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 3(2), pages 133-147.
    • Handle: RePEc:ids:ijrevm:v:3:y:2009:i:2:p:133-147
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