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Pricing-based revenue management for flexible products on a network

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  • Dirk Sierag

    (CWI
    VU University Amsterdam)

Abstract

This paper proposes and analyses a pricing-based revenue management model that allows flexible products on a network, with a non-trivial extension to group reservations. Under stochastic demand the problem can be solved using dynamic programming, though it suffers from the curse of dimensionality. The solution under deterministic demand gives an upper bound on the stochastic problem, and serves as a basis for two heuristics, which are asymptotically optimal. Numerical studies, based on a problem instance from practice, show that the heuristics perform well, even under uncertainty in demand. Moreover, neglecting flexible products can lead to substantial revenue loss.

Suggested Citation

  • Dirk Sierag, 2017. "Pricing-based revenue management for flexible products on a network," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(3), pages 325-339, June.
    • Handle: RePEc:pal:jorapm:v:16:y:2017:i:3:d:10.1057_s41272-016-0061-1
    DOI: 10.1057/s41272-016-0061-1
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    References listed on IDEAS

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    1. Dan Zhang & Zhaosong Lu, 2013. "Assessing the Value of Dynamic Pricing in Network Revenue Management," INFORMS Journal on Computing, INFORMS, vol. 25(1), pages 102-115, February.
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    Cited by:

    1. Klein, Robert & Koch, Sebastian & Steinhardt, Claudius & Strauss, Arne K., 2020. "A review of revenue management: Recent generalizations and advances in industry applications," European Journal of Operational Research, Elsevier, vol. 284(2), pages 397-412.

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