IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v46y2000i6p760-775.html
   My bibliography  Save this article

Revenue Management Without Forecasting or Optimization: An Adaptive Algorithm for Determining Airline Seat Protection Levels

Author

Listed:
  • Garrett van Ryzin

    (Graduate School of Business, Columbia University, New York, New York 10027)

  • Jeff McGill

    (School of Business, Queen's University, Kingston, Ontario, Canada)

Abstract

We investigate a simple adaptive approach to optimizing seat protection levels in airline revenue management systems. The approach uses only historical observations of the relative frequencies of certain seat-filling events to guide direct adjustments of the seat protection levels in accordance with the optimality conditions of Brumelle and McGill (1993). Stochastic approximation theory is used to prove the convergence of this adaptive algorithm to the optimal protection levels. In a simulation study, we compare the revenue performance of this adaptive approach to a more traditional method that combines a censored forecasting method with a common seat allocation heuristic (EMSR-b).

Suggested Citation

  • Garrett van Ryzin & Jeff McGill, 2000. "Revenue Management Without Forecasting or Optimization: An Adaptive Algorithm for Determining Airline Seat Protection Levels," Management Science, INFORMS, vol. 46(6), pages 760-775, June.
    • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:6:p:760-775
    DOI: 10.1287/mnsc.46.6.760.11936
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.46.6.760.11936
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.46.6.760.11936?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    2. Etschmaier, MM & Rothstein, M, 1974. "Operations research in the management of the airlines," Omega, Elsevier, vol. 2(2), pages 157-179, April.
    3. S. L. Brumelle & J. I. McGill, 1993. "Airline Seat Allocation with Multiple Nested Fare Classes," Operations Research, INFORMS, vol. 41(1), pages 127-137, February.
    4. Barry C. Smith & John F. Leimkuhler & Ross M. Darrow, 1992. "Yield Management at American Airlines," Interfaces, INFORMS, vol. 22(1), pages 8-31, February.
    5. Richard D. Wollmer, 1992. "An Airline Seat Management Model for a Single Leg Route When Lower Fare Classes Book First," Operations Research, INFORMS, vol. 40(1), pages 26-37, February.
    6. Peter P. Belobaba, 1989. "OR Practice—Application of a Probabilistic Decision Model to Airline Seat Inventory Control," Operations Research, INFORMS, vol. 37(2), pages 183-197, April.
    7. Lawrence R. Weatherford & Samuel E. Bodily, 1992. "A Taxonomy and Research Overview of Perishable-Asset Revenue Management: Yield Management, Overbooking, and Pricing," Operations Research, INFORMS, vol. 40(5), pages 831-844, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kavitha Balaiyan & R. K. Amit & Atul Kumar Malik & Xiaodong Luo & Amit Agarwal, 2019. "Joint forecasting for airline pricing and revenue management," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(6), pages 465-482, December.
    2. Syed Asif Raza & Rafi Ashrafi & Ali Akgunduz, 2020. "A bibliometric analysis of revenue management in airline industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(6), pages 436-465, December.
    3. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    4. Chatwin, Richard E., 2000. "Optimal dynamic pricing of perishable products with stochastic demand and a finite set of prices," European Journal of Operational Research, Elsevier, vol. 125(1), pages 149-174, August.
    5. Mihai Banciu & Fredrik Ødegaard & Alia Stanciu, 2019. "Distribution-free bounds for the expected marginal seat revenue heuristic with dependent demands," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(2), pages 155-163, April.
    6. Kalyan Talluri & Garrett van Ryzin, 2000. "Revenue management under general discrete choice model of consumer behavior," Economics Working Papers 533, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2001.
    7. Kalyan Talluri & Garrett van Ryzin, 2004. "Revenue Management Under a General Discrete Choice Model of Consumer Behavior," Management Science, INFORMS, vol. 50(1), pages 15-33, January.
    8. Feng, Youyi & Xiao, Baichun, 2006. "A continuous-time seat control model for single-leg flights with no-shows and optimal overbooking upper bound," European Journal of Operational Research, Elsevier, vol. 174(2), pages 1298-1316, October.
    9. Thomas Spengler & Stefan Rehkopf, 2005. "Revenue Management Konzepte zur Entscheidungsunterstützung bei der Annahme von Kundenaufträgen," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 16(2), pages 123-146, June.
    10. Richard Van Slyke & Yi Young, 2000. "Finite Horizon Stochastic Knapsacks with Applications to Yield Management," Operations Research, INFORMS, vol. 48(1), pages 155-172, February.
    11. Cynthia Barnhart & Peter Belobaba & Amedeo R. Odoni, 2003. "Applications of Operations Research in the Air Transport Industry," Transportation Science, INFORMS, vol. 37(4), pages 368-391, November.
    12. You, Peng-Sheng, 2008. "An efficient computational approach for railway booking problems," European Journal of Operational Research, Elsevier, vol. 185(2), pages 811-824, March.
    13. Feng, Youyi & Xiao, Baichun, 2006. "Integration of pricing and capacity allocation for perishable products," European Journal of Operational Research, Elsevier, vol. 168(1), pages 17-34, January.
    14. Kalyan Talluri & Garrett van Ryzin, 1998. "An Analysis of Bid-Price Controls for Network Revenue Management," Management Science, INFORMS, vol. 44(11-Part-1), pages 1577-1593, November.
    15. Ali Hortaçsu & Olivia R. Natan & Hayden Parsley & Timothy Schwieg & Kevin R. Williams, 2021. "Organizational Structure and Pricing: Evidence from a Large U.S. Airline," NBER Working Papers 29508, National Bureau of Economic Research, Inc.
    16. Yingjie Lan & Huina Gao & Michael O. Ball & Itir Karaesmen, 2008. "Revenue Management with Limited Demand Information," Management Science, INFORMS, vol. 54(9), pages 1594-1609, September.
    17. Wang, Xiubin & Regan, Amelia, 2006. "Dynamic yield management when aircraft assignments are subject to swap," Transportation Research Part B: Methodological, Elsevier, vol. 40(7), pages 563-576, August.
    18. Youyi Feng & Baichun Xiao, 2000. "A Continuous-Time Yield Management Model with Multiple Prices and Reversible Price Changes," Management Science, INFORMS, vol. 46(5), pages 644-657, May.
    19. Chew, Ek Peng & Lee, Chulung & Liu, Rujing, 2009. "Joint inventory allocation and pricing decisions for perishable products," International Journal of Production Economics, Elsevier, vol. 120(1), pages 139-150, July.
    20. J Pinder, 2005. "Using revenue management to improve pricing and capacity management in programme management," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(1), pages 75-87, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:46:y:2000:i:6:p:760-775. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.