Economics at your fingertips  

Value-At-Risk Optimal Policies for Revenue Management Problems

Matthias Koenig and Joern Meissner
Additional contact information
Matthias Koenig: Department of Management Science, Lancaster University Management School,

No MRG/0018, Working Papers from Department of Management Science, Lancaster University

Abstract: Consider a single-leg dynamic revenue management problem with fare classes controlled by capacity in a risk-averse setting. The revenue management strategy aims at limiting the down-side risk, and in particular, value-at-risk. A value-at-risk optimised policy offers an advantage when considering applications which do not allow for a large number of reiterations. They allow for specifying a confidence level regarding undesired scenarios. We state the underlying problem as a Markov decision process and provide a computational method for computing policies, which optimise the value-at-risk for a given confidence level. This is achieved by computing dynamic programming solutions for a set of target revenue values and combining the solutions in order to attain the requested multi-stage risk-averse policy. Numerical examples and comparison with other risk-sensitive approaches are discussed.

Keywords: operations research; risk management; capacity control; revenue management; risk; value-at-risk (search for similar items in EconPapers)
JEL-codes: C61 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010-05, Revised 2014-12
New Economics Papers: this item is included in nep-cmp and nep-rmg
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Webpage (text/html)

Related works:
Journal Article: Value-at-risk optimal policies for revenue management problems (2015) Downloads
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:

Access Statistics for this paper

More papers in Working Papers from Department of Management Science, Lancaster University Contact information at EDIRC.
Bibliographic data for series maintained by Joern Meissner (). This e-mail address is bad, please contact .

Page updated 2020-08-11
Handle: RePEc:lms:mansci:mrg-0018