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The Role of Robust Optimization in Single-Leg Airline Revenue Management

Author

Listed:
  • c{S}. .Ilker Birbil

    (Faculty of Engineering and Natural Sciences, Sabanc{\i} University, 34956 Istanbul, Turkey)

  • J. B. G. Frenk

    (Erasmus University Rotterdam, Postbus 1738, 3000 DR Rotterdam, The Netherlands)

  • Joaquim A. S. Gromicho

    (Vrije Universiteit, FEWEB-Econometrie, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands, and ORTEC, Postbus 490, 2800 AL Gouda, The Netherlands)

  • Shuzhong Zhang

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

Abstract

In this paper, we introduce robust versions of the classical static and dynamic single-leg seat allocation models. These robust models take into account the inaccurate estimates of the underlying probability distributions. As observed by simulation experiments, it turns out that for these robust versions the variability compared to their classical counterparts is considerably reduced with a negligible decrease in average revenue.

Suggested Citation

  • c{S}. .Ilker Birbil & J. B. G. Frenk & Joaquim A. S. Gromicho & Shuzhong Zhang, 2009. "The Role of Robust Optimization in Single-Leg Airline Revenue Management," Management Science, INFORMS, vol. 55(1), pages 148-163, January.
    • Handle: RePEc:inm:ormnsc:v:55:y:2009:i:1:p:148-163
    DOI: 10.1287/mnsc.1070.0843
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    References listed on IDEAS

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    Cited by:

    1. Ş. İlker Birbil & J. B. G. Frenk & Joaquim A. S. Gromicho & Shuzhong Zhang, 2014. "A Network Airline Revenue Management Framework Based on Decomposition by Origins and Destinations," Transportation Science, INFORMS, vol. 48(3), pages 313-333, August.
    2. Yaqing Xu & Jiang Zhang & Zihao Chen & Yihua Wei, 2021. "Single-Manufacturer Multi-Retailer Supply Chain Models with Discrete Stochastic Demand," Sustainability, MDPI, vol. 13(15), pages 1-13, July.
    3. Lan, Yingjie & Ball, Michael O. & Karaesmen, Itir Z. & Zhang, Jean X. & Liu, Gloria X., 2015. "Analysis of seat allocation and overbooking decisions with hybrid information," European Journal of Operational Research, Elsevier, vol. 240(2), pages 493-504.
    4. Zeynep Turgay & Fikri Karaesmen & Egemen Lerzan Örmeci, 2018. "Structural properties of a class of robust inventory and queueing control problems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(8), pages 699-716, December.
    5. Yingjie Lan & Michael O. Ball & Itir Z. Karaesmen, 2011. "Regret in Overbooking and Fare-Class Allocation for Single Leg," Manufacturing & Service Operations Management, INFORMS, vol. 13(2), pages 194-208, December.
    6. Özkan, Can & Karaesmen, Fikri & Özekici, Süleyman, 2013. "Structural properties of Markov modulated revenue management problems," European Journal of Operational Research, Elsevier, vol. 225(2), pages 324-331.
    7. Georgia Perakis & Guillaume Roels, 2010. "Robust Controls for Network Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 56-76, November.
    8. Huina Gao & Michael O. Ball & Itir Z. Karaesmen, 2016. "Distribution-free methods for multi-period, single-leg booking control," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(6), pages 425-453, December.
    9. Huanan Zhang & Cong Shi & Chao Qin & Cheng Hua, 2016. "Stochastic regret minimization for revenue management problems with nonstationary demands," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(6), pages 433-448, September.
    10. Wang, Charles X. & Webster, Scott & Zhang, Sidong, 2014. "Robust price-setting newsvendor model with interval market size and consumer willingness-to-pay," International Journal of Production Economics, Elsevier, vol. 154(C), pages 100-112.
    11. Zeynep Turgay & Fikri Karaesmen & E. Örmeci, 2015. "A dynamic inventory rationing problem with uncertain demand and production rates," Annals of Operations Research, Springer, vol. 231(1), pages 207-228, August.
    12. J. B. G. Frenk & Behrooz Pourghannad & Semih O. Sezer, 2017. "A Static Model in Single Leg Flight Airline Revenue Management," Transportation Science, INFORMS, vol. 51(1), pages 214-232, February.
    13. Mehrani, Saharnaz & Sefair, Jorge A., 2022. "Robust assortment optimization under sequential product unavailability," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1027-1043.
    14. Gönsch, Jochen, 2017. "A survey on risk-averse and robust revenue management," European Journal of Operational Research, Elsevier, vol. 263(2), pages 337-348.
    15. B. Vinod, 2021. "An approach to adaptive robust revenue management with continuous demand management in a COVID-19 era," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(1), pages 10-14, February.
    16. Wang, Jiamin & Xiao, Baichun, 2017. "A minmax regret price control model for managing perishable products with uncertain parameters," European Journal of Operational Research, Elsevier, vol. 258(2), pages 652-663.
    17. Paat Rusmevichientong & Huseyin Topaloglu, 2012. "Robust Assortment Optimization in Revenue Management Under the Multinomial Logit Choice Model," Operations Research, INFORMS, vol. 60(4), pages 865-882, August.
    18. Weaver, Robert D. & Moon, Yongma, 2011. "Pricing Perishables," 2011 International European Forum, February 14-18, 2011, Innsbruck-Igls, Austria 122007, International European Forum on System Dynamics and Innovation in Food Networks.
    19. Syed Asif Raza & Rafi Ashrafi & Ali Akgunduz, 2020. "A bibliometric analysis of revenue management in airline industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(6), pages 436-465, December.
    20. Nurşen Aydın & Ş. İlker Birbil & J. B. G. Frenk & Nilay Noyan, 2013. "Single-Leg Airline Revenue Management with Overbooking," Transportation Science, INFORMS, vol. 47(4), pages 560-583, November.
    21. Liang, Jinpeng & Li, Liming & Zheng, Jianfeng & Tan, Zhijia, 2023. "Service-oriented container slot allocation policy under stochastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 176(C).
    22. Dirk Sierag & Rob Mei, 2016. "Single-leg choice-based revenue management: a robust optimisation approach," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(6), pages 454-467, December.

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