Near-Optimal Primal-Dual Algorithms for Quantity-Based Network Revenue Management

68 Pages Posted: 6 Jan 2021 Last revised: 12 Oct 2021

See all articles by Rui Sun

Rui Sun

Massachusetts Institute of Technology (MIT) - Institute for Data, Systems, and Society (IDSS)

Xinshang Wang

Alibaba Group

Zijie Zhou

Massachusetts Institute of Technology - Operations Research Center

Date Written: November 11, 2020

Abstract

We study the canonical quantity-based network revenue management (NRM) problem where the decision-maker must irrevocably accept or reject each arriving customer request with the goal of maximizing the total revenue given limited resources. The exact solution to the problem by dynamic programming is computationally intractable due to the well-known curse of dimensionality. Existing works in the literature make use of the solution to the deterministic linear program (DLP) to design asymptotically optimal algorithms. Those algorithms rely on repeatedly solving DLPs to achieve near-optimal regret bounds. It is, however, time-consuming to repeatedly compute the DLP solutions in real time, especially in large-scale problems that may involve hundreds of millions of demand units.

In this paper, we propose innovative algorithms for the NRM problem that are easy to implement and do not require solving any DLPs. Our algorithm achieves a regret bound of $O(\log k)$, where $k$ is the system size. To the best of our knowledge, this is the first NRM algorithm that (i) has an $o(\sqrt{k})$ asymptotic regret bound, and (ii) does not require solving any DLPs.

Keywords: revenue management

Suggested Citation

Sun, Rui and Wang, Xinshang and Zhou, Zijie, Near-Optimal Primal-Dual Algorithms for Quantity-Based Network Revenue Management (November 11, 2020). Available at SSRN: https://ssrn.com/abstract=3728397 or http://dx.doi.org/10.2139/ssrn.3728397

Rui Sun (Contact Author)

Massachusetts Institute of Technology (MIT) - Institute for Data, Systems, and Society (IDSS) ( email )

77 Massachusetts Avenue
E18-436
Cambridge, MA 02139-4307
United States

Xinshang Wang

Alibaba Group ( email )

Zijie Zhou

Massachusetts Institute of Technology - Operations Research Center ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

HOME PAGE: http://https://zijiezhou.mit.edu

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