Mathematical Programming for Network Revenue Management Revisited

European Journal of Operational Research, Volume 137, Issue 1, February 2002, Pages 72-92

Posted: 1 Mar 2014

See all articles by Sanne De Boer

Sanne De Boer

Invesco

Richard Freling

Erasmus Universiteit Rotterdam, ECOPT & ERIM (Deceased)

Nanda Piersma

University of Amsterdam - Academy for Economic Studies

Date Written: 2002

Abstract

Mathematical programming models for airline seat inventory control provide booking limits and bid-prices for all itineraries and fare classes. E.L. Williamson [Airline network seat inventory control: methodologies and revenue impacts, Ph.D. thesis, Massachusetts Institute of Technology, Cambridge, MA, 1992] finds that simple deterministic approximation methods based on average demand often outperform more advanced probabilistic heuristics. We argue that this phenomenon is due to a booking process that includes nesting of the fare classes, which is ignored in the modeling phase. The differences in the performance between these approximations are studied using a stochastic programming model that includes the deterministic model as a special case. Our study carefully examines the trade-off between computation time and the aggregation level of demand uncertainty with examples of a multi-leg flight and a single-hub network.

Keywords: revenue management, mathematical programming, simulation, airline network

JEL Classification: C61

Suggested Citation

De Boer, Sanne and Freling, Richard and Piersma, Nanda, Mathematical Programming for Network Revenue Management Revisited (2002). European Journal of Operational Research, Volume 137, Issue 1, February 2002, Pages 72-92, Available at SSRN: https://ssrn.com/abstract=2402535

Sanne De Boer (Contact Author)

Invesco ( email )

1166 Avenue of the Americas
27th Floor
New York, NY 10036
United States

Richard Freling

Erasmus Universiteit Rotterdam, ECOPT & ERIM (Deceased)

Nanda Piersma

University of Amsterdam - Academy for Economic Studies ( email )

PO BOX 295
1000 AG Amsterdam
Netherlands
+31 20 5236434 (Phone)
+31 20 5236459 (Fax)

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