Optimal booking control in revenue management with two substitutable resources

David Sayah () and Stefan Irnich ()
Additional contact information
David Sayah: Johannes Gutenberg University Mainz
Stefan Irnich: Johannes Gutenberg University Mainz

Mathematical Methods of Operations Research, 2019, vol. 89, issue 2, No 3, 189-222

Abstract: Abstract This paper studies optimal booking policies for capacity control models in revenue management with two substitutable resources. Our model covers a broader class of problems than previous works including (i) flexible demand and opaque selling for (ii) both dynamic and static demand settings. We provide a unifying characterization of the structure of optimal booking control by exploiting concavity, submodularity, and subconcavity of the value function. Our characterization is based on the notion of optimal “booking paths” formalizing the idea that an optimal allocation of a demand batch decomposes into a sequence of optimal single-request allocations. In addition, we examine the relationship between our booking path-based and a switching curve-based policy, which has been known previously for the case with dynamic demand. We show that both these characterizations describe an optimal policy. Computationally, there is no advantage of implementing either switching curves or booking paths in the dynamic setting. In the static setting, however, one can resort to the simple criteria which we propose in order to construct the optimal booking paths, thereby accelerating the evaluation of the value function.

Keywords: Revenue management; Dynamic programming; Substitutable resources; Optimal booking policies (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s00186-018-0646-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:mathme:v:89:y:2019:i:2:d:10.1007_s00186-018-0646-0

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/00186

DOI: 10.1007/s00186-018-0646-0

Access Statistics for this article

Mathematical Methods of Operations Research is currently edited by Oliver Stein

More articles in Mathematical Methods of Operations Research from Springer, Gesellschaft für Operations Research (GOR), Nederlands Genootschap voor Besliskunde (NGB)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().