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Analysis of seat allocation and overbooking decisions with hybrid information

Author

Listed:
  • Lan, Yingjie
  • Ball, Michael O.
  • Karaesmen, Itir Z.
  • Zhang, Jean X.
  • Liu, Gloria X.

Abstract

We investigate a single-leg airline revenue management problem where an airline has limited demand information and uncensored no-show information. To use such hybrid information for simultaneous overbooking and booking control decisions, we combine expected overbooking cost with revenue. Then we take a robust optimization approach with a regret-based criterion. While the criterion is defined on a myriad of possible demand scenarios, we show that only a small number of them are necessary to compute the objective. We also prove that nested booking control policies are optimal among all deterministic ones. We further develop an effective computational method to find the optimal policy and compare our policy to others proposed in the literature.

Suggested Citation

  • Lan, Yingjie & Ball, Michael O. & Karaesmen, Itir Z. & Zhang, Jean X. & Liu, Gloria X., 2015. "Analysis of seat allocation and overbooking decisions with hybrid information," European Journal of Operational Research, Elsevier, vol. 240(2), pages 493-504.
    • Handle: RePEc:eee:ejores:v:240:y:2015:i:2:p:493-504
    DOI: 10.1016/j.ejor.2014.07.021
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    References listed on IDEAS

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    7. Xu, Guangming & Liu, Yihan & Gao, Yihan & Liu, Wei, 2023. "Integrated optimization of train stopping plan and seat allocation scheme for railway systems under equilibrium travel choice and elastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 177(C).
    8. Chua, Geoffrey A. & Lim, Wei Shi & Yeo, Wee Meng, 2016. "Market structure and the value of overselling under stochastic demands," European Journal of Operational Research, Elsevier, vol. 252(3), pages 900-909.
    9. Doraid Dalalah & Mohammad Khasawneh & Sharafuddin Khan, 2022. "Pricing and demand management of air tickets using a multiplicative newsvendor model," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(5), pages 517-528, October.

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