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Single Resource Revenue Management with Independent Demands

  • Guillermo Gallego
  • Huseyin Topaloglu
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 279)

Abstract

In this chapter, we consider the single resource, independent demand revenue management problem with multiple fare classes. This problem arises in the airline industry where different fares for the same cabin are designed to cater to different market segments. As an example, a low fare may have advance purchase and length of stay restrictions and exclude ancillary services such as advance seat selection, luggage handling, and priority boarding. This low fare may target price-conscious consumers who travel for leisure on restricted budgets. On the other hand, a high fare designed for business consumers may be unrestricted, include ancillary services and be designed to be frequently available for late bookings. If requests for the low fare arrive first, the airline risks selling all of its capacity before seeing requests for the high fare. A key decision in revenue management is how much capacity to reserve for higher fare classes, or equivalently how much capacity to make available for lower fare classes. Throughout the chapter, we will refer to airline applications, but the reader should keep in mind that the models apply more generally.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  • Guillermo Gallego
    • 1
  • Huseyin Topaloglu
    • 2
  1. 1.Clearwater BayHong Kong
  2. 2.ORIECornell UniversityNew YorkUSA

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