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Distribution-free bounds for the expected marginal seat revenue heuristic with dependent demands

Author

Listed:
  • Mihai Banciu

    (Bucknell University)

  • Fredrik Ødegaard

    (Western University)

  • Alia Stanciu

    (Bucknell University)

Abstract

This paper extends the fundamental static revenue management capacity control problem by incorporating statistical dependence. A single-resource is sold through multiple fare classes each with a corresponding stochastic, but not necessarily independent, demand. We explicitly account for any level of positive or negative dependence and focus on the traditional macro-level demand model in order to provide distribution-free bounds on the foundational expected marginal seat revenue heuristics, both without and with buy-up. We illustrate for the case with three fare classes and demand drawn from (i) normal distributions, and (ii) normal and exponential distributions.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:jorapm:v:18:y:2019:i:2:d:10.1057_s41272-018-00170-6
    DOI: 10.1057/s41272-018-00170-6
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    References listed on IDEAS

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