IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v63y2012i9p1213-1227.html
   My bibliography  Save this article

A single-resource revenue management problem with random resource consumptions

Author

Listed:
  • W Zhuang

    (School of Management, Xiamen University, Fujian, China)

  • M Gumus

    (Desautels Faculty of Management, McGill University, Montreal, Quebec, Canada)

  • D Zhang

    (Desautels Faculty of Management, McGill University, Montreal, Quebec, Canada)

Abstract

We study a single-resource multi-class revenue management problem where the resource consumption for each class is random and only revealed at departure. The model is motivated by cargo revenue management problems in the airline and other shipping industries. We study how random resource consumption distribution affects the optimal expected profit and identify a preference acceptance order on classes. For a special case where the resource consumption for each class follows the same distribution, we fully characterize the optimal control policy. We then propose two easily computable heuristics: (i) a class-independent heuristic through parameter scaling, and (ii) a decomposition heuristic that decomposes the dynamic programming formulation into a collection of one-dimensional problems. We conduct extensive numerical experiments to investigate the performance of the two heuristics and compared them with several widely studied heuristic policies. Our results show that both heuristics work very well, with class-independent heuristic slightly better between the two. In particular, they consistently outperform heuristics that ignore demand and/or resource consumption uncertainty. Our results demonstrate the importance of considering random resource consumption as another problem dimension in revenue management applications.

Suggested Citation

  • W Zhuang & M Gumus & D Zhang, 2012. "A single-resource revenue management problem with random resource consumptions," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(9), pages 1213-1227, September.
    • Handle: RePEc:pal:jorsoc:v:63:y:2012:i:9:p:1213-1227
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/jors/journal/v63/n9/pdf/jors2011129a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/jors/journal/v63/n9/full/jors2011129a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Moussawi-Haidar, Lama & Nasr, Walid & Jalloul, Maya, 2021. "Standardized cargo network revenue management with dual channels under stochastic and time-dependent demand," European Journal of Operational Research, Elsevier, vol. 295(1), pages 275-291.
    2. Lin, Danping & Lee, Carman Ka Man & Yang, Jilin, 2017. "Air cargo revenue management under buy-back policy," Journal of Air Transport Management, Elsevier, vol. 61(C), pages 53-63.
    3. Delgado, Felipe & Trincado, Ricardo & Pagnoncelli, Bernardo K., 2019. "A multistage stochastic programming model for the network air cargo allocation under capacity uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 292-307.
    4. Moussawi-Haidar, Lama, 2014. "Optimal solution for a cargo revenue management problem with allotment and spot arrivals," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 72(C), pages 173-191.
    5. 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.
    6. So, Mee Chi & Thomas, Lyn C. & Huang, Bo, 2016. "Lending decisions with limits on capital available: The polygamous marriage problem," European Journal of Operational Research, Elsevier, vol. 249(2), pages 407-416.

    More about this item

    Statistics

    Access and download statistics

    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:pal:jorsoc:v:63:y:2012:i:9:p:1213-1227. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    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.