A single-resource revenue management problem with random resource consumptions

W Zhuang, M Gumus and D Zhang
Additional contact information
W Zhuang: School of Management, Xiamen University, Fujian, China
M Gumus: Desautels Faculty of Management, McGill University, Montreal, Quebec, Canada
D Zhang: Desautels Faculty of Management, McGill University, Montreal, Quebec, Canada

Journal of the Operational Research Society, 2012, vol. 63, issue 9, 1213-1227

Abstract: We study a single-resource multi-class revenue management problem where the resource consumption for each class is random and only revealed at departure. The model is motivated by cargo revenue management problems in the airline and other shipping industries. We study how random resource consumption distribution affects the optimal expected profit and identify a preference acceptance order on classes. For a special case where the resource consumption for each class follows the same distribution, we fully characterize the optimal control policy. We then propose two easily computable heuristics: (i) a class-independent heuristic through parameter scaling, and (ii) a decomposition heuristic that decomposes the dynamic programming formulation into a collection of one-dimensional problems. We conduct extensive numerical experiments to investigate the performance of the two heuristics and compared them with several widely studied heuristic policies. Our results show that both heuristics work very well, with class-independent heuristic slightly better between the two. In particular, they consistently outperform heuristics that ignore demand and/or resource consumption uncertainty. Our results demonstrate the importance of considering random resource consumption as another problem dimension in revenue management applications.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.palgrave-journals.com/jors/journal/v63/n9/pdf/jors2011129a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/jors/journal/v63/n9/full/jors2011129a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
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:pal:jorsoc:v:63:y:2012:i:9:p:1213-1227

Ordering information: This journal article can be ordered from
http://www.springer. ... search/journal/41274

Access Statistics for this article

Journal of the Operational Research Society is currently edited by Tom Archibald and Jonathan Crook

More articles in Journal of the Operational Research Society from Palgrave Macmillan, The OR Society
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().