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Distribution-free bounds for the expected marginal seat revenue heuristic with dependent demands

Mihai Banciu (), Fredrik Ødegaard () and Alia Stanciu ()
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Mihai Banciu: Bucknell University
Fredrik Ødegaard: Western University
Alia Stanciu: Bucknell University

Journal of Revenue and Pricing Management, 2019, vol. 18, issue 2, 155-163

Abstract: Abstract This paper extends the fundamental static revenue management capacity control problem by incorporating statistical dependence. A single-resource is sold through multiple fare classes each with a corresponding stochastic, but not necessarily independent, demand. We explicitly account for any level of positive or negative dependence and focus on the traditional macro-level demand model in order to provide distribution-free bounds on the foundational expected marginal seat revenue heuristics, both without and with buy-up. We illustrate for the case with three fare classes and demand drawn from (i) normal distributions, and (ii) normal and exponential distributions.

Keywords: Revenue management; Capacity allocation; Expected marginal seat revenue; Stochastic dependence (search for similar items in EconPapers)
Date: 2019
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