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Approximate nucleolus-based revenue sharing in airline alliances

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  • Kimms, Alf
  • Çetiner, Demet

Abstract

Alliances allow the airlines to extend their networks and increase the number of destinations they can access. Different from the traditional single airline approach, in an alliance, partner airlines may sell tickets for the same itinerary. In addition, one itinerary may consist of several flight legs, each of which may be operated by a different airline. A major issue that needs to be addressed is how to share the revenue generated from selling a ticket for a product among the individual airlines in a fair way. The fair allocation of the revenue has a critical importance for the long-term stability of the alliance. We model the problem as a cooperative game and show that the core of the game is non-empty. We propose to use a revenue proration scheme based on the concept of the nucleolus. The numerical studies reveal that the revenue shares can effectively be computed even for large alliance networks.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ejores:v:220:y:2012:i:2:p:510-521
    DOI: 10.1016/j.ejor.2012.01.057
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Li, Tingting & Xie, Jinxing & Lu, Shengmin & Tang, Jiafu, 2016. "Duopoly game of callable products in airline revenue management," European Journal of Operational Research, Elsevier, vol. 254(3), pages 925-934.
    2. Li, Deng-Feng, 2012. "A fast approach to compute fuzzy values of matrix games with payoffs of triangular fuzzy numbers," European Journal of Operational Research, Elsevier, vol. 223(2), pages 421-429.
    3. Çetiner, D. & Kimms, A., 2013. "Assessing fairness of selfish revenue sharing mechanisms for airline alliances," Omega, Elsevier, vol. 41(4), pages 641-652.
    4. 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.
    5. Grauberger, Waldemar & Kimms, Alf, 2016. "Revenue management under horizontal and vertical competition within airline alliances," Omega, Elsevier, vol. 59(PB), pages 228-237.
    6. Guajardo, Mario & Jörnsten, Kurt, 2015. "Common mistakes in computing the nucleolus," European Journal of Operational Research, Elsevier, vol. 241(3), pages 931-935.
    7. Yuntong Wang, 2016. "Revenue Sharing in Airline Alliance Networks," Working Papers 1605, University of Windsor, Department of Economics.

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