An Application of Markov Decision Processes to the Seat Inventory Control Problem

Christiane Barz and Karl-Heinz Waldmann
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Christiane Barz: Universität Karlsruhe
Karl-Heinz Waldmann: Universität Karlsruhe

A chapter in Perspectives on Operations Research, 2006, pp 113-128 from Springer

Abstract: Abstract Airlines typically divide a pool of identical seats into several booking classes that represent e.g. different discount levels with differentiated sale conditions and restrictions. Assuming perfect market segmentation, mixing discount and higher-fare passengers in the same aircraft compartment offers the airline the potential of gaining revenue from seats that would otherwise fly empty. If too many seats are sold at a discount price, however, the airline company would loose full-fare passengers. If too many seats are protected for higher-fare demand, the flight would depart with vacant seats. Seat inventory control deals with the optimal allocation of capacity to these different classes of demand, forming a substantial part of a revenue management system.

Keywords: Markov Decision Process; Revenue Management; External Process; Optimal Decision Rule; Terminal Cost (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/978-3-8350-9064-4_7

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