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Assessing fairness of selfish revenue sharing mechanisms for airline alliances

Author

Listed:
  • Çetiner, D.
  • Kimms, A.

Abstract

Airline alliances offer flights including flight legs operated by different airlines. A major problem is how to share the revenue obtained through selling a flight ticket among the airlines in a fair way. Recently, Kimms and Çetiner [1] have proposed fair revenue allocations based on the solution concept nucleolus, which assumes that the decisions of the alliance are given centrally. However, in an alliance, each airline has a selfish behavior and tries to maximize its own revenue. The contribution of this paper is twofold. First, we provide a method to evaluate the fairness of revenue sharing mechanisms applied in a selfish setting. The method includes a simulation model for the booking process of the alliance and uses the nucleolus-based allocations as benchmark. Second, we develop a revenue sharing mechanism based on the transfer of dual prices. The fairness of the new mechanism and several other existing approaches is assessed through a numerical study.

Suggested Citation

  • Çetiner, D. & Kimms, A., 2013. "Assessing fairness of selfish revenue sharing mechanisms for airline alliances," Omega, Elsevier, vol. 41(4), pages 641-652.
  • Handle: RePEc:eee:jomega:v:41:y:2013:i:4:p:641-652
    DOI: 10.1016/j.omega.2012.08.006
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    References listed on IDEAS

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    1. Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
    2. de Boer, Sanne V. & Freling, Richard & Piersma, Nanda, 2002. "Mathematical programming for network revenue management revisited," European Journal of Operational Research, Elsevier, vol. 137(1), pages 72-92, February.
    3. Graf, M. & Kimms, A., 2011. "An option-based revenue management procedure for strategic airline alliances," European Journal of Operational Research, Elsevier, vol. 215(2), pages 459-469, December.
    4. 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.
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    Citations

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    Cited by:

    1. Cai, Jianhu & Hu, Xiaoqing & Tadikamalla, Pandu R. & Shang, Jennifer, 2017. "Flexible contract design for VMI supply chain with service-sensitive demand: Revenue-sharing and supplier subsidy," European Journal of Operational Research, Elsevier, vol. 261(1), pages 143-153.
    2. Grauberger, Waldemar & Kimms, Alf, 2016. "Revenue management under horizontal and vertical competition within airline alliances," Omega, Elsevier, vol. 59(PB), pages 228-237.
    3. 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.

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