A Revenue Sharing Mechanism Based on the Transfer of Dual Prices

Abstract

In the previous chapter we have provided a framework for evaluating the fairness of the revenue sharing mechanisms applied in an alliance revenue management system, where the partners make their decisions independently. Through the use of this framework, three selfish revenue sharing mechanisms, which have already been existing in the literature, have been compared. Among them, the local value heuristic, where the fare of a flight is distributed to the airlines proportional to the local value of the used flight legs, has lead to the fairest revenue allocations. In this chapter, we develop a revenue sharing mechanism, which combines the local value heuristic with a dual price transfer process.