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Distribution-free bounds for the expected marginal seat revenue heuristic with dependent demands

  • Mihai BanciuEmail author
  • Fredrik Ødegaard
  • Alia Stanciu
Research Article
  • 92 Downloads

Abstract

This paper extends the fundamental static revenue management capacity control problem by incorporating statistical dependence. A single-resource is sold through multiple fare classes each with a corresponding stochastic, but not necessarily independent, demand. We explicitly account for any level of positive or negative dependence and focus on the traditional macro-level demand model in order to provide distribution-free bounds on the foundational expected marginal seat revenue heuristics, both without and with buy-up. We illustrate for the case with three fare classes and demand drawn from (i) normal distributions, and (ii) normal and exponential distributions.

Keywords

Revenue management Capacity allocation Expected marginal seat revenue Stochastic dependence 

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Copyright information

© Springer Nature Limited 2018

Authors and Affiliations

  1. 1.Freeman College of ManagementBucknell UniversityLewisburgUSA
  2. 2.Ivey Business SchoolWestern UniversityLondonCanada

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