Provably Near-Optimal LP-Based Policies for Revenue Management in Systems with Reusable Resources
MIT Sloan School of Management - Operations Research Center
IBM - T. J. Watson Research Center
February 7, 2008
MIT Sloan Research Paper No. 4702-08
Motivated by emerging applications in workforce management, we consider a class of revenue management problems in systems with reusable resources. The corresponding applications are modeled using the well-known loss network systems.
We use an extremely simple linear program (LP) that provides an upper bound on the best achievable expected long-run revenue rate. The optimal solution of the LP is used to devise a conceptually simple control policy that we call the class selection policy (CSP). Moreover, the LP is used to analyze the performance of the CSP policy. We obtain the first control policy with uniform performance guarantees. In particular, for the model with single resource and uniform resource requirements, the CSP policy is guaranteed to have expected long-run revenue rate that is at least half of the best achievable. More generally, as the ratio between the capacity of the system and the maximum resource requirement grows to infinity, the CSP policy is asymptotically optimal, regardless of any other parameter of the problem. The asymptotic performance analysis that we obtain is more general than existing results in several important dimensions. It is based on several novel ideas that we believe will be useful in other settings.
Number of Pages in PDF File: 27
Keywords: Revenue Management, Linear Programming, Approximation Algorithms, Asymptotic Optimalityworking papers series
Date posted: May 7, 2008
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