New formulations for price and ticket availability decisions in choice-based network revenue management

Michael C. Clough, Timothy L. Jacobs, Esma Gel

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We consider the network revenue management (RM) problem under a MultiNomial Logit (MNL) discrete choice model. We present two mathematical formulations that build on previous research, focusing on reducing the size and complexity of the problem while maintaining an accurate representation of passenger choice and industry practices. The first formulation addresses the computational issues of traditional network revenue management by introducing a Mixed Integer Program (MIP) that reduces the number of variables needed to consider while maintaining revenue performance versus other models. The second formulation eliminates the need for static pricing of fare classes, as seen in most RM literature, and considers a continuous pricing decision linked with ticket availability, directly incorporating passenger sensitivities to price and other attributes. Both models perform well in example test cases, improving on popular leg- and network-based RM methods used in practice.

Original languageEnglish (US)
Title of host publicationAGIFORS 55th Annual Symposium: Analytics for Efficiency and Customer Centric Optimization
PublisherAirline Group of the International Federation of Operations Research Societies (AGIFORS)
StatePublished - 2015
EventAGIFORS 55th Annual Symposium: Analytics for Efficiency and Customer Centric Optimization - Washington, United States
Duration: Aug 24 2015Aug 28 2015

Other

OtherAGIFORS 55th Annual Symposium: Analytics for Efficiency and Customer Centric Optimization
CountryUnited States
CityWashington
Period8/24/158/28/15

Keywords

  • Airline revenue management (RM)
  • Dynamic pricing
  • Mixed integer programming (MIP)
  • Multinomial logit (MNL) choice model

ASJC Scopus subject areas

  • Strategy and Management
  • Industrial relations
  • Information Systems
  • Management Science and Operations Research
  • Business and International Management
  • Transportation

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  • Cite this

    Clough, M. C., Jacobs, T. L., & Gel, E. (2015). New formulations for price and ticket availability decisions in choice-based network revenue management. In AGIFORS 55th Annual Symposium: Analytics for Efficiency and Customer Centric Optimization Airline Group of the International Federation of Operations Research Societies (AGIFORS).