Analysis of airline seat control with region factor

Yanming Ge

doi:10.3934/jimo.2012.8.363

Article Contents

2012, Volume 8, Issue 2: 363-378. Doi: 10.3934/jimo.2012.8.363

This issue Previous Article Robust portfolio selection with a combined WCVaR and factor model Next Article A real option approach to optimal inventory management of retail products

Analysis of airline seat control with region factor

Yanming Ge^1,

1.
College of Information Technology, Shanghai Ocean University, Shanghai, 201306

Received: December 31, 2010

Revised: August 31, 2011

Published: March 2012

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Abstract

Due to the lower consumption level to the flights in some regions, the flights' vacancy rate is usually very high and the service level is low. To airlines, the common procedure to handle such problems is to employ different price systems. But this in return results in unsatisfying effects. In this paper we discussed the above issue from another standpoint. Firstly, we introduced a parameter, called region factor, and then constructed a stochastic dynamic model of a single-leg flight related to it. Secondly, we derived some monotone properties for the expected revenue functions. These properties ensured that we could choose appropriate region factor to recover the high vacancy rate caused by the lower consumption levels, but also adopt the similar optimal threshold control strategy as the traditional revenue management did. Furthermore, in addition to improving the service levels, the proper region factor can increase the total revenue sometimes. Lastly, Numerical results were used to illustrate properties of the model.

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Mathematics Subject Classification: Primary: 93E20, 90B06; Secondary: 49L20.

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