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A Tractable Consideration Set Structure for Network Revenue Management

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  • Arne Strauss
  • Kalyan Talluri

Abstract

The dynamic program for choice network RM is intractable and approximated by a deterministic linear program called the CDLP. When the segment consideration sets overlap, the CDLP is difficult to solve. A weaker formulation (SDCP+) is tractable and approximates the CDLP value very closely. We show that if the segment consideration sets follow a tree structure, the two problems are equivalent, and give a counterexample to show that cycles can induce a gap between CDLP and the relaxation.

Suggested Citation

  • Arne Strauss & Kalyan Talluri, 2012. "A Tractable Consideration Set Structure for Network Revenue Management," Working Papers 606, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:606
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    References listed on IDEAS

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    1. Tudor Bodea & Mark Ferguson & Laurie Garrow, 2009. "Data Set--Choice-Based Revenue Management: Data from a Major Hotel Chain," Manufacturing & Service Operations Management, INFORMS, vol. 11(2), pages 356-361, December.
    2. Meissner, Joern & Strauss, Arne, 2012. "Network revenue management with inventory-sensitive bid prices and customer choice," European Journal of Operational Research, Elsevier, vol. 216(2), pages 459-468.
    3. Kalyan Talluri & Garrett van Ryzin, 2004. "Revenue Management Under a General Discrete Choice Model of Consumer Behavior," Management Science, INFORMS, vol. 50(1), pages 15-33, January.
    4. Joern Meissner & Arne Strauss & Kalyan Talluri, 2011. "An Enhanced Concave Program Relaxation for Choice Network Revenue Management," Working Papers 534, Barcelona School of Economics.
    5. Dan Zhang & Daniel Adelman, 2009. "An Approximate Dynamic Programming Approach to Network Revenue Management with Customer Choice," Transportation Science, INFORMS, vol. 43(3), pages 381-394, August.
    6. Qian Liu & Garrett van Ryzin, 2008. "On the Choice-Based Linear Programming Model for Network Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 10(2), pages 288-310, October.
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    Cited by:

    1. Sierag, D.D. & Koole, G.M. & van der Mei, R.D. & van der Rest, J.I. & Zwart, B., 2015. "Revenue management under customer choice behaviour with cancellations and overbooking," European Journal of Operational Research, Elsevier, vol. 246(1), pages 170-185.
    2. Sumit Kunnumkal & Kalyan Talluri, 2012. "A new compact linear programming formulation for choice network revenue management," Economics Working Papers 1349, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Kalyan Talluri, 2014. "New Formulations for Choice Network Revenue Management," INFORMS Journal on Computing, INFORMS, vol. 26(2), pages 401-413, May.
    4. 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.
    5. Sumit Kunnumkal & Kalyan Talluri, 2012. "A New Compact Linear Programming Formulation for Choice Network Revenue Management," Working Papers 677, Barcelona School of Economics.

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    More about this item

    Keywords

    discrete-choice models; network revenue management; consideration sets;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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