Analysis of seat allocation and overbooking decisions with hybrid information

Yingjie Lan, Michael O. Ball, Itir Z. Karaesmen, Jean X. Zhang and Gloria X. Liu

European Journal of Operational Research, 2015, vol. 240, issue 2, 493-504

Abstract: We investigate a single-leg airline revenue management problem where an airline has limited demand information and uncensored no-show information. To use such hybrid information for simultaneous overbooking and booking control decisions, we combine expected overbooking cost with revenue. Then we take a robust optimization approach with a regret-based criterion. While the criterion is defined on a myriad of possible demand scenarios, we show that only a small number of them are necessary to compute the objective. We also prove that nested booking control policies are optimal among all deterministic ones. We further develop an effective computational method to find the optimal policy and compare our policy to others proposed in the literature.

Keywords: Revenue management; Competitive analysis; Regret; Cross entropy method (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:240:y:2015:i:2:p:493-504

DOI: 10.1016/j.ejor.2014.07.021

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