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A Combined Average-Case and Worst-Case Analysis for an Integrated Hub Location and Revenue Management Problem

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  • Jia-Zhen Huo
  • Yan-Ting Hou
  • Feng Chu
  • Jun-Kai He

Abstract

This paper investigates joint decisions on airline network design and capacity allocation by integrating an uncapacitated single allocation p-hub median location problem into a revenue management problem. For the situation in which uncertain demand can be captured by a finite set of scenarios, we extend this integrated problem with average profit maximization to a combined average-case and worst-case analysis of this integration. We formulate this problem as a two-stage stochastic programming framework to maximize the profit, including the cost of installing the hubs and a weighted sum of average and worst case transportation cost and the revenue from tickets over all scenarios. This model can give flexible decisions by putting the emphasis on the importance of average and worst case profits. To solve this problem, a genetic algorithm is applied. Computational results demonstrate the outperformance of the proposed formulation.

Suggested Citation

  • Jia-Zhen Huo & Yan-Ting Hou & Feng Chu & Jun-Kai He, 2019. "A Combined Average-Case and Worst-Case Analysis for an Integrated Hub Location and Revenue Management Problem," Discrete Dynamics in Nature and Society, Hindawi, vol. 2019, pages 1-13, March.
    • Handle: RePEc:hin:jnddns:8651728
    DOI: 10.1155/2019/8651728
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    Cited by:

    1. Lee, Chungmok, 2022. "A robust optimization approach with probe-able uncertainty," European Journal of Operational Research, Elsevier, vol. 296(1), pages 218-239.

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