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A Dynamic Airline Seat Inventory Control Model and Its Optimal Policy

Author

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  • Youyi Feng

    (Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, NT, Hong Kong)

  • Baichun Xiao

    (Department of Management, Long Island University, C. W. Post, Brookville, New York, 11548)

Abstract

We consider an airline seat inventory control problem with multiple origins, one hub, and one destination. Passengers from the origins fly to the destination via the hub. Seat capacity of the hub-destination flight is fixed. Demands at origins are assumed to obey the Poisson process. To maximize the expected revenue, management faces decisions on allocating seats among competing origin-destination routes. This study presents a stochastic control model and develops optimal control rules. The basic model is subsequently distended to consider multiple fares on each route, time-dependent demands, and booking control on an extended network. A numerical example shows that optimal seat control is simple and efficient.

Suggested Citation

  • Youyi Feng & Baichun Xiao, 2001. "A Dynamic Airline Seat Inventory Control Model and Its Optimal Policy," Operations Research, INFORMS, vol. 49(6), pages 938-949, December.
    • Handle: RePEc:inm:oropre:v:49:y:2001:i:6:p:938-949
    DOI: 10.1287/opre.49.6.938.10026
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    References listed on IDEAS

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    Cited by:

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    2. Chew, Ek Peng & Lee, Chulung & Liu, Rujing, 2009. "Joint inventory allocation and pricing decisions for perishable products," International Journal of Production Economics, Elsevier, vol. 120(1), pages 139-150, July.
    3. Sato, Kimitoshi, 2019. "Price Trends and Dynamic Pricing in Perishable Product Market Consisting of Superior and Inferior Firms," European Journal of Operational Research, Elsevier, vol. 274(1), pages 214-226.
    4. Feng, Youyi & Xiao, Baichun, 2006. "Integration of pricing and capacity allocation for perishable products," European Journal of Operational Research, Elsevier, vol. 168(1), pages 17-34, January.
    5. Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
    6. Feng, Youyi & Xiao, Baichun, 2006. "A continuous-time seat control model for single-leg flights with no-shows and optimal overbooking upper bound," European Journal of Operational Research, Elsevier, vol. 174(2), pages 1298-1316, October.
    7. Cynthia Barnhart & Peter Belobaba & Amedeo R. Odoni, 2003. "Applications of Operations Research in the Air Transport Industry," Transportation Science, INFORMS, vol. 37(4), pages 368-391, November.
    8. Liu, Hengyu & Zhang, Juliang & Zhou, Chen & Ru, Yihong, 2018. "Optimal purchase and inventory retrieval policies for perishable seasonal agricultural products," Omega, Elsevier, vol. 79(C), pages 133-145.
    9. Ge, Yanming & Xu, Yifan & Dai, Yue, 2010. "Overbooking with bilateral transference in parallel flights," International Journal of Production Economics, Elsevier, vol. 128(2), pages 577-585, December.
    10. Tim Dittmer & Bob Carbaugh, 2014. "Major League Baseball: Dynamic Ticket Pricing and Measurement Costs," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 14(1), pages 44-57, Fall.
    11. Xiao, Baichun & Yang, Wei, 2010. "A revenue management model for products with two capacity dimensions," European Journal of Operational Research, Elsevier, vol. 205(2), pages 412-421, September.
    12. Huang, Yiqian & Ge, Yanming & Zhang, Xiandong & Xu, Yifan, 2013. "Overbooking for parallel flights with transference," International Journal of Production Economics, Elsevier, vol. 144(2), pages 582-589.
    13. Wen, Xiaoqin & Xu, Chen & Hu, Qiying, 2016. "Dynamic capacity management with uncertain demand and dynamic price," International Journal of Production Economics, Elsevier, vol. 175(C), pages 121-131.
    14. Hu, Qiying & Wei, Yihua & Xia, Yusen, 2010. "Revenue management for a supply chain with two streams of customers," European Journal of Operational Research, Elsevier, vol. 200(2), pages 582-598, January.
    15. Chen, Shaoxiang & Gallego, Guillermo & Li, Michael Z.F. & Lin, Bing, 2010. "Optimal seat allocation for two-flight problems with a flexible demand segment," European Journal of Operational Research, Elsevier, vol. 201(3), pages 897-908, March.

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