Skip to main content
SpringerLink
Log in
Book cover

Computer-based Modelling and Optimization in Transportation pp 195–207Cite as

Bid-Price Heuristics for Unrestricted Fare Structures in Cargo Revenue Management

  • Chapter
  • First Online:

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 262))

Abstract

In the present work we propose two bid-price based heuristic approaches to tackle a stochastic price-oriented demand of air cargo transportation. We assume fares are non-decreasing over time: the earlier the booking, the cheaper the fare. We consider a single-leg flight without overbooking practices or no-show customers. The proposed framework is suited for air cargo carriers providing a unique product to all its price-oriented customers. The business sustainability relies on a significant reduction in fares that would outperform other benefits, an earlier time of delivery above all. Nevertheless, our modelling framework may be easily extended to other modes of cargo transportation, such as maritime, where a given shipment receives the same service regardless the paid fare, which, in turn, only depends on the time the booking request is made.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

References

  1. Adelman, D.: Dynamic bid prices in revenue management. Oper. Res. 55(4), 647–661 (2007)

    Article  MATH  MathSciNet  Google Scholar 

  2. Amaruchkul, D., Cooper, W., Gupta, D.: Single-leg air-cargo revenue management. Technical report, University of Minnesota (2005)

    Google Scholar 

  3. Amaruchkul, D., Cooper, W., Gupta, D.: Air cargo capacity contracts under asymmetric information. Working paper, supply chain and operations research laboratory, University of Minnesota

    Google Scholar 

  4. Bijvank, M., Haensel, A., Ecuyer, P.L., Marcotte, P.: Time-dependent bid prices for multi-period network revenue management problems. Working paper, (2012)

    Google Scholar 

  5. Billings, J., Diener, A., Yuen, B.: Cargo revenue optimisation. J. Pricing Revenue Manag. 2(1), 69–79 (2003)

    Article  Google Scholar 

  6. Boyd, E., Kallesen, R.: The science of revenue management when passengers purchase the lowest available fare. J. Pricing Revenue Manag. 3(2), 171–177 (2004)

    Article  Google Scholar 

  7. Bront, J., Méndez-Díaz, I., Vulcano G.: A column generation algorithm for choice-based network revenue management. Oper. Res. 57(3), 769–784 (2007)

    Google Scholar 

  8. Chew, E., Huang, H., Johnson, E., Nemhauser, G., Sokol, J., Leong, C.: Short-term booking of air cargo space. Eur. J. Oper. Res. 174, 1979–1990 (2006)

    Article  MATH  Google Scholar 

  9. Cléaz-Savoyen, R.: (2005). Airline revenue management methods for less restricted fare structure. MS thesis, Massachusetts Institute of Technology, Cambridge

    Google Scholar 

  10. Cooper, W., Homem-de Mello, T., Kleywegt, A.: Models of the spiral- down effect in revenue management. Oper. Res. 54(5), 968–987 (2006)

    Article  MATH  Google Scholar 

  11. Fiig, T., Isler, K., Hopperstad, H., Cléaz-Svaoyen, R.: Davn-MR: A unified theory of O&D optimization in a mixed network with restricted and unrestricted fare products. In: AGIFORS Reservation and Yield Management Meeting. Cape Town, South Africa, 15–19 May 2005

    Google Scholar 

  12. Hopperstad, C., Belobaba, P.: Alternative RM algorithms for unrestricted fare structures. In: AGIFORS Reservation and Yield Management Meeting. Aukland, New Zealand, 28–31 Mar 2004

    Google Scholar 

  13. Huang, K., Hsu, W.: Revenue management for air cargo space with supply uncertainty. Proc. East. Asia Soc. Transp. Stud. 5, 570–580 (2005)

    Google Scholar 

  14. Kasilingam, R.: Air cargo revenue management: Characteristics and complexities. Eur. J. Oper. Res. 96, 36–44 (1996)

    Article  Google Scholar 

  15. Lenstra, A., Lenstra, J., Rinnooy Kan, A., Wansbeek, T.: Two lines least squares. Ann. Discret. Math. 16, 201–211 (1982)

    MATH  MathSciNet  Google Scholar 

  16. Liu, Q., van Ryzin, G.: On the choice-based linear programming model for network revenue management. Manufact. Serv. Oper. Manag. 10(2), 288–310 (2008)

    Article  Google Scholar 

  17. Luo, S., Çakanyıldırıma, M., Kasilingam, R.: Two-dimensional cargo overbooking models. Eur. J. Oper. Res. 197(3), 862–883 (2009)

    Article  MATH  Google Scholar 

  18. Pak, K., Dekker, R.: Cargo revenue management: Bid-prices for a 0-1 multi knapsack problem. Technical report, Erasmus University Rotterdam, The Netherlands (2004)

    Google Scholar 

  19. Popescu, A., Barnes, E., Johnson, E., Keskinocak, P.: Bid prices when demand is a mix of individual and batch bookings. Transp. Sci. 47 (2), 198–213 (2013)

    Google Scholar 

  20. Rinnooy Kan, A., Stougie, L., Vercellis, C.: A class of generalized greedy algorithms for the multi-knapsack problem. Discret. Appl. Math. 42, 279–290 (1993)

    Article  MATH  MathSciNet  Google Scholar 

  21. Simpson, R. W.: Using network flow techniques to find shadow prices for market and seat inventory control. Technical report, MIT Flight Transportation Laboratory Memorandum M89-1, Massachusetts Institute of Technology, Cambridge (1989)

    Google Scholar 

  22. Slager, B., Kapteijns, L.: Implementation of cargo management at KLM. J. Pricing Revenue Manag. 3(1), 80–90 (2004)

    Article  Google Scholar 

  23. Smith, B.C., Penn, C.W.: Analysis of alternate origin-destination control strategies. In: Proceedings of AGIFORS 28th Annual Symposium, pp. 123–144. New Seabury (1988)

    Google Scholar 

  24. Talluri, K., van Ryzin, G.: An analysis of bid-price controls for network revenue management. Manag. Sci. 44(1), 1577–1593 (1998)

    Article  MATH  Google Scholar 

  25. Talluri, K., van Ryzin, G.: The Theory and Practice of Revenue Management. Springer, New York (2004)

    MATH  Google Scholar 

  26. Totamane R., Dasgupta A., Rao S.: Air cargo demand modeling and prediction. Syst. J. IEEE forthcoming (2012). doi:10.1109/JSYST.2012.2218511

  27. Westermann, D.: (Realtime) dynamic pricing in an integrated revenue management and pricing environment: An approach to handling undifferentiated fare structures in low-fare markets. J. Pricing Revenue Manag. 4(4), 395–405 (2006)

    Article  Google Scholar 

  28. Zhang, D.: An improved dynamic programming decomposition approach for network revenue management. Manufact. Serv. Oper. Manag. 13(1), 35–52 (2010)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Dipartimento di Ingegneria e Architettura, Università degli Studi di Trieste, Via A. Valerio 10, 34127, Trieste, Italy

    Lorenzo Castelli & Desirée Rigonat

  2. Dipartimento di Management, Università Ca’ Foscari di Venezia, Fondamenta San Giobbe 837, 30121, Cannaregio, VE, Italy

    Raffaele Pesenti

Authors
  1. Lorenzo Castelli
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Raffaele Pesenti
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Desirée Rigonat
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Lorenzo Castelli .

Editor information

Editors and Affiliations

  1. UGEI-INESC TEC, Faculty of Engineering, University of Porto, Porto, Portugal

    Jorge Freire de Sousa

  2. Department of Civil, Environmental and Architectural Engineering, University of Padova, Padova, Italy

    Riccardo Rossi

Rights and permissions

Reprints and permissions

Copyright information

© 2014 Springer International Publishing Switzerland

About this chapter

Cite this chapter

Castelli, L., Pesenti, R., Rigonat, D. (2014). Bid-Price Heuristics for Unrestricted Fare Structures in Cargo Revenue Management. In: de Sousa, J., Rossi, R. (eds) Computer-based Modelling and Optimization in Transportation. Advances in Intelligent Systems and Computing, vol 262. Springer, Cham. https://doi.org/10.1007/978-3-319-04630-3_15

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-04630-3_15

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-04629-7

  • Online ISBN: 978-3-319-04630-3

  • eBook Packages: EngineeringEngineering (R0)

Publish with us

Policies and ethics

Search

Navigation