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An Application of Markov Decision Processes to the Seat Inventory Control Problem

In: Perspectives on Operations Research

Author

Listed:
  • Christiane Barz

    (Universität Karlsruhe)

  • Karl-Heinz Waldmann

    (Universität Karlsruhe)

Abstract

Airlines typically divide a pool of identical seats into several booking classes that represent e.g. different discount levels with differentiated sale conditions and restrictions. Assuming perfect market segmentation, mixing discount and higher-fare passengers in the same aircraft compartment offers the airline the potential of gaining revenue from seats that would otherwise fly empty. If too many seats are sold at a discount price, however, the airline company would loose full-fare passengers. If too many seats are protected for higher-fare demand, the flight would depart with vacant seats. Seat inventory control deals with the optimal allocation of capacity to these different classes of demand, forming a substantial part of a revenue management system.

Suggested Citation

  • Christiane Barz & Karl-Heinz Waldmann, 2006. "An Application of Markov Decision Processes to the Seat Inventory Control Problem," Springer Books, in: Martin Morlock & Christoph Schwindt & Norbert Trautmann & Jürgen Zimmermann (ed.), Perspectives on Operations Research, pages 113-128, Springer.
    • Handle: RePEc:spr:sprchp:978-3-8350-9064-4_7
    DOI: 10.1007/978-3-8350-9064-4_7
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    Cited by:

    1. C. Barz & K. Waldmann, 2007. "Risk-sensitive capacity control in revenue management," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 65(3), pages 565-579, June.
    2. Mohit Tyagi & Nomesh B. Bolia, 2022. "Approaches for restaurant revenue management," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(1), pages 17-35, February.

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