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Dynamic control of inventories over finite horizon with an application to airline revenue management

When a customer requests a discount fare, the airline must decide whether
to sell the seat at the requested discount or to hold the seat in hope that a customer
will arrive later who will pay more. I model this situation for a single leg flight with
multiple fare classes and customers who arrive according to a semi-Markov process
(possibly nonhomogeneous). These customers can request multiple seats (batch requests)
and can be overbooked. Under certain conditions, I show that the value
function decreases as departure approaches. If each customer only requests a single
seat or if the requests can be partially satisfied, then I show that there are optimal
booking curves which decrease as departure approaches. I provide counterexamples
to show that this structural property of the optimal policy does not hold in general.
When customers are allowed to cancel I show that booking curves exist and may be
monotone in certain cases.
I also consider the situation where the customer's request size and fare
offered are not known, but their joint probability distribution is available, and show
that under certain conditions existence of booking curves obtains, and that under
further assumptions, they are monotone. Finally, the theoretical results are used
in realistic numerical examples, which are compared to certain deterministic upper
bounds and revenues obtained under heuristic policies.
The airline yield management problem described above is an instance of
a generic revenue management problem, which, in turn, can be cast into a finite
horizon semi-Markov dynamic optimal control problem. I provide examples of other
applications of revenue management.
Date11 1900
CreatorsWalczak, Darius
Source SetsLibrary and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation
RelationUBC Retrospective Theses Digitization Project []

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