Bid-price behavior in network RM: Forecast decrementing and bid-price bounding

Adam Bockelie and Peter Belobaba
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Adam Bockelie: MIT International Center for Air Transportation
Peter Belobaba: MIT International Center for Air Transportation

Journal of Revenue and Pricing Management, 2016, vol. 15, issue 2, No 3, 95-106

Abstract: Abstract This article investigates two practical concerns with bid-price control origin–destination (OD) revenue management (RM) systems. First, we examine forecast decrementing methods for the common situation where demand forecast generation is decoupled from booking policy optimization. Second, we explore the impacts of two bounding schemes designed to eliminate bid price declines close to departure. Using the Passenger Origin–Destination Simulator (PODS), we find (i) more sophisticated forecast decrements increase revenue compared with the traditional approach when combined with advanced forecasting methods incorporating passenger willingness to pay and (ii) bid price bounds increase revenue with standard forecasting methods but decrease revenue with advanced forecasting methods.

Keywords: airline revenue management; bid prices; forecasting; network revenue management (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1057/rpm.2016.22

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