Journal of Revenue and Pricing Management

, Volume 16, Issue 6, pp 569–579 | Cite as

Robust revenue opportunity modeling with quadratic programming

Research Article
First Online:
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Abstract

This practice-oriented paper describes a new, network-level revenue opportunity model based on a novel formulation, the sales-based quadratic program. This optimizes revenue while providing market-level allocations that are more stable and robust over time than traditional solutions based on linear programming. Because airline origin–destination networks foster passenger connections, they comprise many more markets served than flights operated; such structures provide additional degrees of freedom for revenue management (RM) controls and often lead to alternate optimal (or near optimal) solutions. These alternate control solutions cause manageability issues for airline RM analysts in practice. Our proposed approach provides better stability in revenue opportunity model (ROM) controls over time, aiding RM analysts in setting effective default allocations and monitoring outliers. It is also a consideration when holding RM analysts accountable to market-level ROM performance metrics. Methods for reducing ROM control variation have not been addressed in prior literature.

Keywords

airline pricing fares revenue management performance measurement optimization quadratic programming bootstrapping 
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Notes

Acknowledgements

The authors would like to gratefully acknowledge our research partners in Sabre Consulting and Etihad Airways for providing support and data for analysis; both of these contributions greatly aided our research. We would also like to thank the anonymous referees for their time and helpful suggestions.

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Copyright information

© Macmillan Publishers Ltd 2017

Authors and Affiliations

  1. 1.SabreSouthlakeUSA

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