Network revenue management with inventory-sensitive bid prices and customer choice

Joern Meissner and Arne Strauss

European Journal of Operational Research, 2012, vol. 216, issue 2, 459-468

Abstract: We develop an approximate dynamic programming approach to network revenue management models with customer choice that approximates the value function of the Markov decision process with a non-linear function which is separable across resource inventory levels. This approximation can exhibit significantly improved accuracy compared to currently available methods. It further allows for arbitrary aggregation of inventory units and thereby reduction of computational workload, yields upper bounds on the optimal expected revenue that are provably at least as tight as those obtained from previous approaches. Computational experiments for the multinomial logit choice model with distinct consideration sets show that policies derived from our approach can outperform some recently proposed alternatives, and we demonstrate how aggregation can be used to balance solution quality and runtime.

Keywords: Revenue management; Dynamic programming/optimal control: applications; Approximate (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221711005625
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Network Revenue Management with Inventory-Sensitive Bid Prices and Customer Choice (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:216:y:2012:i:2:p:459-468

DOI: 10.1016/j.ejor.2011.06.033

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().