Article2006

Optimal booking limits in the presence of strategic consumer behavior

23 citations0/0 files storedInternational Transactions in Operational Research

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Supply Chain and Inventory Management Aviation Industry Analysis and Trends Healthcare Operations and Scheduling Optimization

Abstract

Abstract We consider a two‐period airline yield management problem where customers may act strategically. Specifically, we allow for the possibility that a customer may decide to defer purchase in the hope that a ticket cheaper than those currently on offer will become available. We also allow for the possibility that some customers will buy a more expensive ticket if the cheaper tickets are not available. We show how to find optimal booking limits in the presence of such strategic customer behavior. We also explicitly incorporate the fact that, once a booking limit has been reached, demand distributions are now censored distributions.

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References

1992A Taxonomy and Research Overview of Perishable-Asset Revenue Management: Yield Management, Overbooking, and Pricing 1989OR Practice—Application of a Probabilistic Decision Model to Airline Seat Inventory Control 2005Special Issue Papers: Forecasting and control of passenger bookings 1993A Model for Dynamic Airline Seat Inventory Control with Multiple Seat Bookings 1995Optimal and Approximate Control Policies for Airline Booking with Sequential Nonmonotonic Fare Classes 1996Comparing Decision Rules that Incorporate Customer Diversion in Perishable Asset Revenue Management Situations 1989The Airline Discount Fare Allocation Problem 2003Wait or buy? The strategic consumer: Pricing and profit implications

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2007Customer Behavior Modeling in Revenue Management and Auctions: A Review and New Research Opportunities 2009Recent developments in demand forecasting for airline revenue management 2007An airline seat allocation game 2011Seat inventory control for sequential multiple flights with customer choice behavior 2015The impact of customer buying behavior on the optimal allocation decisions

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