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Optimization models for joint airline pricing and seat inventory control : multiple products, multiple periods

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dc.contributor.advisor Peter P. Belobaba. en_US Cizaire, Claire (Claire Jia Ling) en_US
dc.contributor.other Massachusetts Institute of Technology. Dept. of Aeronautics and Astronautics. en_US 2012-09-13T18:55:42Z 2012-09-13T18:55:42Z 2011 en_US 2011 en_US
dc.description Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Aeronautics and Astronautics, 2011. en_US
dc.description Cataloged from PDF version of thesis. en_US
dc.description Includes bibliographical references (p. 153-157). en_US
dc.description.abstract Pricing and revenue management are two essential levers to optimize the sales of an airline's seat inventory and maximize revenues. Over the past few decades, they have generated a great deal of research but have typically been studied and optimized separately. On the one hand, the pricing process focused on demand segmentation and optimal fares, regardless of any capacity constraints. On the other hand, researchers in revenue management developed algorithms to set booking limits by fare product, given a set of fares and capacity constraints. This thesis develops several approaches to solve for the optimal fares and booking limits jointly and simultaneously. The underlying demand volume in an airline market is modeled as a function of the fares. We propose an initial approach to the two-product, two-period revenue optimization problem by first assuming that the demand is deterministic. We show that the booking limit on sales of the lower-priced product is unnecessary in this case, allowing us to simplify the optimization problem. We then develop a stochastic optimization model and analyze the combined impacts of fares and booking limits on the total number of accepted bookings when the underlying demand is uncertain. We demonstrate that this joint optimization approach can provide a 3-4% increase in revenues from a traditional pricing and revenue management practices. The stochastic model is then extended to the joint pricing and seat inventory control optimization problem for booking horizons involving more than two booking periods, as is the case in reality. A generalized methodology for optimization is presented, and we show that the complexity of the joint optimization problem increases substantially with the number of booking periods. We thus develop three heuristics. Simulations for a three-period problem show that all heuristics outperform the deterministic optimization model. In addition, two of the heuristics can provide revenues close to those obtained with the stochastic model. This thesis provides a basis for the integration of pricing and revenue management. The combined effects of fares and booking limits on the number of accepted bookings, and thus on the revenues, are explicitly taken into account in our joint optimization models. We showed that the proposed approaches can further enhance revenues. en_US
dc.description.statementofresponsibility by Claire Cizaire. en_US
dc.format.extent 157 p. en_US
dc.language.iso eng en_US
dc.publisher Massachusetts Institute of Technology en_US
dc.rights M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. en_US
dc.rights.uri en_US
dc.subject Aeronautics and Astronautics. en_US
dc.title Optimization models for joint airline pricing and seat inventory control : multiple products, multiple periods en_US
dc.type Thesis en_US Ph.D. en_US
dc.contributor.department Massachusetts Institute of Technology. Dept. of Aeronautics and Astronautics. en_US
dc.identifier.oclc 807127451 en_US

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