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A simulation analysis for the re-solving issue of the network revenue management problem

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  • Huang, Kuancheng
  • Lin, Chia-Yi

Abstract

The classic dynamic programming approach is not applicable to the airline network revenue management (RM) problem of a practical size due to the curse of dimensionality. Many heuristic methods, including the most popular bid-price control approach, generate the approximate control decisions based on various static formulations, which need to be re-solved to take into account the dynamic features of the problem. By a simulation experiment, this study examines the re-solving issue of the bid-price method and tests a new method, the parameterized function approach, in which no problem-resolving is required. Based on the results, the parameterized function approach is found to be a promising alternative. As for the bid-price control approach, a high re-solving frequency is needed for a good result.

Suggested Citation

  • Huang, Kuancheng & Lin, Chia-Yi, 2014. "A simulation analysis for the re-solving issue of the network revenue management problem," Journal of Air Transport Management, Elsevier, vol. 38(C), pages 36-42.
    • Handle: RePEc:eee:jaitra:v:38:y:2014:i:c:p:36-42
    DOI: 10.1016/j.jairtraman.2013.12.016
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    References listed on IDEAS

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