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Assessing fairness of selfish revenue sharing mechanisms for airline alliances

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  • 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. 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.
    2. SCHMEIDLER, David, 1969. "The nucleolus of a characteristic function game," LIDAM Reprints CORE 44, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    5. 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.
    6. 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.
    7. M. Maschler & B. Peleg & L. S. Shapley, 1979. "Geometric Properties of the Kernel, Nucleolus, and Related Solution Concepts," Mathematics of Operations Research, INFORMS, vol. 4(4), pages 303-338, November.
    8. William W. Cooper & Lawrence M. Seiford & Kaoru Tone, 2007. "Data Envelopment Analysis," Springer Books, Springer, edition 0, number 978-0-387-45283-8, September.
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    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.
    4. Grauberger, Waldemar & Kimms, Alf, 2016. "Revenue management under horizontal and vertical competition within airline alliances," Omega, Elsevier, vol. 59(PB), pages 228-237.
    5. Algaba, Encarnación & Fragnelli, Vito & Llorca, Natividad & Sánchez-Soriano, Joaquin, 2019. "Horizontal cooperation in a multimodal public transport system: The profit allocation problem," European Journal of Operational Research, Elsevier, vol. 275(2), pages 659-665.
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    8. W. Grauberger & A. Kimms, 2018. "Computing pure Nash equilibria in network revenue management games," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(2), pages 481-516, March.

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