Abstract

http://ssrn.com/abstract=1567645
 


 



Using Dynamic Programming Decomposition for Revenue Management with Opaque Products


Jochen Gönsch


University of Augsburg - Department of Analytics & Optimization

Claudius Steinhardt


Bundeswehr University Munich (UniBw) - Department of Quantitative Methods

April 26, 2013

Business Research 6 (2013), Issue 1, pp. 94-115

Abstract:     
Opaque products enable service providers to hide specific characteristics of their service fulfillment from the customer until after purchase. Prominent examples include internet-based service providers selling airline tickets without defining details, such as departure time or operating airline, until the booking has been made. Owing to the resulting flexibility in resource utilization, the traditional revenue management process needs to be modified. In this paper, we extend dynamic programming decomposition techniques widely used for traditional revenue management to develop an intuitive capacity control approach that allows for the incorporation of opaque products. In a simulation study, we show that the developed approach significantly outperforms other well-known capacity control approaches adapted to the opaque product setting. Based on the approach, we also provide computational examples of how the share of opaque products as well as the degree of opacity can influence the results.

Number of Pages in PDF File: 23

Keywords: Revenue Management, Opaque Products, Capacity Control, Dynamic Programming Decomposition

JEL Classification: C61, M11, L91, L93

Accepted Paper Series





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Date posted: January 25, 2011 ; Last revised: May 20, 2013

Suggested Citation

Gönsch, Jochen and Steinhardt, Claudius, Using Dynamic Programming Decomposition for Revenue Management with Opaque Products (April 26, 2013). Business Research 6 (2013), Issue 1, pp. 94-115. Available at SSRN: http://ssrn.com/abstract=1567645

Contact Information

Jochen Gönsch (Contact Author)
University of Augsburg - Department of Analytics & Optimization ( email )
Universitätsstraße 16
Augsburg, 86159
Germany
+49 821 598 - 4148 (Phone)
+49 821 598 - 4226 (Fax)
HOME PAGE: http://www.wiwi.uni-augsburg.de/bwl/klein/team_goensch.html
Claudius Steinhardt
Bundeswehr University Munich (UniBw) - Department of Quantitative Methods ( email )
Neubibeg, 85577
Germany
+49 89 6004 - 4234 (Phone)
+49 89 6004 - 3080 (Fax)
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