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Analysis of a Joint Pricing and Seat Allocation Model in a Hub-to-Hub Airline Network

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Abstract

In airline revenue management, after differentiating products on each itinerary according to various restrictions, management needs to set the prices for the products. A deterministic joint pricing and seat allocation model is proposed. It is reduced to a separable concave programming problem and thus readily solvable. Focusing on a special hub-to-hub airline network, monotonicity of the pricing decisions is explored. Using a nonlinear primal–dual technique, it is shown that some itineraries’ optimal prices are decreasing, while some other itineraries’ optimal prices are increasing with a capacity change in either a side leg or the middle leg. Such structural properties add important managerial insights into the pricing model for revenue managers in an airline company.

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Acknowledgments

The author thanks Shu-Zhong Zhang and Si-Mai He for many insightful discussions on this subject.

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Authors and Affiliations

  1. School of Economics and Management, Luoyang Institute of Science and Technology, Luoyang, 471023, Henan, China

    Hong-Zhi He

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  1. Hong-Zhi He
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Correspondence to Hong-Zhi He.

Additional information

This work was supported by the Startup Grant of Scientific Research for Doctors of Luoyang Institute of Science and Technology (No. 2011BZ12).

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He, HZ. Analysis of a Joint Pricing and Seat Allocation Model in a Hub-to-Hub Airline Network. J. Oper. Res. Soc. China 4, 309–333 (2016). https://doi.org/10.1007/s40305-016-0121-7

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  • DOI: https://doi.org/10.1007/s40305-016-0121-7

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