Regret in Overbooking and Fare-Class Allocation for Single Leg
AbstractFocusing on a seller's regret in not acting optimally, we develop a model of overbooking and fare-class allocation in the multifare, single-resource problem in revenue management. We derive optimal static overbooking levels and booking limits, in closed form, that minimize the maximum relative regret (i.e., maximize competitive ratio). We prove that the optimal booking limits are nested. Our work addresses a number of important issues. (i) We use partial information, which is critical because of the difficulty in forecasting fare-class demand. Demand and no-shows are characterized using interval uncertainty in our model. (ii) We make joint overbooking and fare-class allocation decisions. (iii) We obtain conservative but practical overbooking levels that improve the service quality without sacrificing profits. Using computational experiments, we benchmark our methods to existing ones and show that our model leads to effective, consistent, and robust decisions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Manufacturing & Service Operations Management.
Volume (Year): 13 (2011)
Issue (Month): 2 (December)
revenue management; worst-case analysis; regret; overbooking; fare-class allocation;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Andersson, Jonas & Jörnsten, Kurt & Nonås, Sigrid Lise & Sandal, Leif & Ubøe, Jan, 2013.
"A maximum entropy approach to the newsvendor problem with partial information,"
European Journal of Operational Research,
Elsevier, vol. 228(1), pages 190-200.
- Andersson, Jonas & Jörnsten, Kurt & Nonås, Sigrid Lise & Sandal, Leif K. & Ubøe, Jan, 2011. "A maximum entropy approach to the newsvendor problem with partial information," Discussion Papers 2011/14, Department of Business and Management Science, Norwegian School of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.