Revenue Management Without Forecasting or Optimization: An Adaptive Algorithm for Determining Airline Seat Protection Levels

Garrett van Ryzin () and Jeff McGill ()
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Garrett van Ryzin: Graduate School of Business, Columbia University, New York, New York 10027
Jeff McGill: School of Business, Queen's University, Kingston, Ontario, Canada

Management Science, 2000, vol. 46, issue 6, 760-775

Abstract: We investigate a simple adaptive approach to optimizing seat protection levels in airline revenue management systems. The approach uses only historical observations of the relative frequencies of certain seat-filling events to guide direct adjustments of the seat protection levels in accordance with the optimality conditions of Brumelle and McGill (1993). Stochastic approximation theory is used to prove the convergence of this adaptive algorithm to the optimal protection levels. In a simulation study, we compare the revenue performance of this adaptive approach to a more traditional method that combines a censored forecasting method with a common seat allocation heuristic (EMSR-b).

Keywords: yield management; revenue management; airlines; forecasting; optimization; fare class allocation; distribution free; adaptive algorithms; stochastic approximation (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:46:y:2000:i:6:p:760-775

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