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

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.

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Correspondence to Mihai Banciu.

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Banciu, M., Ødegaard, F. & Stanciu, A. Distribution-free bounds for the expected marginal seat revenue heuristic with dependent demands. J Revenue Pricing Manag 18, 155–163 (2019). https://doi.org/10.1057/s41272-018-00170-6

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Keywords

  • Revenue management
  • Capacity allocation
  • Expected marginal seat revenue
  • Stochastic dependence