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UBC Theses and Dissertations
Dynamic control of inventories over finite horizon with an application to airline revenue management Walczak, Darius
Abstract
When a customer requests a discount fare, the airline must decide whether to sell the seat at the requested discount or to hold the seat in hope that a customer will arrive later who will pay more. I model this situation for a single leg flight with multiple fare classes and customers who arrive according to a semi-Markov process (possibly nonhomogeneous). These customers can request multiple seats (batch requests) and can be overbooked. Under certain conditions, I show that the value function decreases as departure approaches. If each customer only requests a single seat or if the requests can be partially satisfied, then I show that there are optimal booking curves which decrease as departure approaches. I provide counterexamples to show that this structural property of the optimal policy does not hold in general. When customers are allowed to cancel I show that booking curves exist and may be monotone in certain cases. I also consider the situation where the customer's request size and fare offered are not known, but their joint probability distribution is available, and show that under certain conditions existence of booking curves obtains, and that under further assumptions, they are monotone. Finally, the theoretical results are used in realistic numerical examples, which are compared to certain deterministic upper bounds and revenues obtained under heuristic policies. The airline yield management problem described above is an instance of a generic revenue management problem, which, in turn, can be cast into a finite horizon semi-Markov dynamic optimal control problem. I provide examples of other applications of revenue management.
Item Metadata
Title |
Dynamic control of inventories over finite horizon with an application to airline revenue management
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Creator | |
Publisher |
University of British Columbia
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Date Issued |
2000
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Description |
When a customer requests a discount fare, the airline must decide whether
to sell the seat at the requested discount or to hold the seat in hope that a customer
will arrive later who will pay more. I model this situation for a single leg flight with
multiple fare classes and customers who arrive according to a semi-Markov process
(possibly nonhomogeneous). These customers can request multiple seats (batch requests)
and can be overbooked. Under certain conditions, I show that the value
function decreases as departure approaches. If each customer only requests a single
seat or if the requests can be partially satisfied, then I show that there are optimal
booking curves which decrease as departure approaches. I provide counterexamples
to show that this structural property of the optimal policy does not hold in general.
When customers are allowed to cancel I show that booking curves exist and may be
monotone in certain cases.
I also consider the situation where the customer's request size and fare
offered are not known, but their joint probability distribution is available, and show
that under certain conditions existence of booking curves obtains, and that under
further assumptions, they are monotone. Finally, the theoretical results are used
in realistic numerical examples, which are compared to certain deterministic upper
bounds and revenues obtained under heuristic policies.
The airline yield management problem described above is an instance of
a generic revenue management problem, which, in turn, can be cast into a finite
horizon semi-Markov dynamic optimal control problem. I provide examples of other
applications of revenue management.
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Extent |
8415616 bytes
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Genre | |
Type | |
File Format |
application/pdf
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Language |
eng
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Date Available |
2009-07-23
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Provider |
Vancouver : University of British Columbia Library
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Rights |
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
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DOI |
10.14288/1.0099532
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URI | |
Degree | |
Program | |
Affiliation | |
Degree Grantor |
University of British Columbia
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Graduation Date |
2000-11
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Campus | |
Scholarly Level |
Graduate
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Aggregated Source Repository |
DSpace
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Item Media
Item Citations and Data
Rights
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.