Recent Advances in Revenue Management

Abstract

Thus far we have discussed models and methods of capacity control and overbooking that are already well established RM tools. However, almost every approach which we have discussed up to now was implicitly based on the following two assumptions:

• The mode of production is fixed and known to the customer before the time of purchase. For instance, if a customer buys a ticket for a single seat from Dresden to San Francisco we have assumed that the itinerary and the travel times are explicitly known to both the passenger and the airline at the time the ticket is bought. Speaking more generally, for each product j = 1, . . ., n and each resource i = 1, . . .,m a known constant r_ij ≥ 0 was given denoting the amount of resource i that is necessary to deliver a unit of product j.

• Because the mode of production was fixed, there were no decisions to be made for the supplier (except of course whether to accept or reject an arriving request). Similarly, customers did not make choices either — we have assumed that an arriving customer has got a preference for a certain designated product j and if j should not be available she just exits the market.