Assessing fairness of selfish revenue sharing mechanisms for airline alliances

D. Çetiner and A. Kimms

Omega, 2013, vol. 41, issue 4, 641-652

Abstract: Airline alliances offer flights including flight legs operated by different airlines. A major problem is how to share the revenue obtained through selling a flight ticket among the airlines in a fair way. Recently, Kimms and Çetiner [1] have proposed fair revenue allocations based on the solution concept nucleolus, which assumes that the decisions of the alliance are given centrally. However, in an alliance, each airline has a selfish behavior and tries to maximize its own revenue. The contribution of this paper is twofold. First, we provide a method to evaluate the fairness of revenue sharing mechanisms applied in a selfish setting. The method includes a simulation model for the booking process of the alliance and uses the nucleolus-based allocations as benchmark. Second, we develop a revenue sharing mechanism based on the transfer of dual prices. The fairness of the new mechanism and several other existing approaches is assessed through a numerical study.

Keywords: Revenue management; Revenue sharing; Airline alliance; Fairness; Selfish behavior (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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DOI: 10.1016/j.omega.2012.08.006

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