Dynamic pricing in airline revenue management

Date

2019-10-15

Author

Selcuk, Ahmet Melih
Avşar, Zeynep Müge

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In this study, an exact Dynamic Programming formulation is developed for price based revenue management in the airline industry. Structural properties of the optimal pricing policy are presented first. Then, the optimal policy is investigated for four different price-demand relationships and the characteristic properties of the airline demand are discussed. Performance of the proposed Dynamic Programming formulation is numerically compared with an alternative approximate approach based on the repeated use of a Mixed Integer Programming model and also with intuitive methods of temporal price discrimination. The numerical results show that significant revenue improvements are obtained by the proposed dynamic pricing methodology.

Subject Keywords

Demand uncertainty, Customer behavior, Time-variant demand, ynamic pricing, Revenue management

URI

https://hdl.handle.net/11511/41887

Journal

JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS

DOI

https://doi.org/10.1016/j.jmaa.2019.06.012

Collections

Department of Industrial Engineering, Article

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Citation Formats

A. M. Selcuk and Z. M. Avşar, “Dynamic pricing in airline revenue management,” JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS, pp. 1191–1217, 2019, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/41887.