Network revenue management with product-specific no-shows

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Kunnumkal, Sumit; Talluri, Kalyan; Topaloglu, Huseyin. Network revenue management with product-specific no-shows. 2010
http://hdl.handle.net/10230/11735
To cite or link this document: http://hdl.handle.net/10230/11735
dc.contributor.author Kunnumkal, Sumit
dc.contributor.author Talluri, Kalyan
dc.contributor.author Topaloglu, Huseyin
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.issued 2010-10-01
dc.identifier.uri http://hdl.handle.net/10230/11735
dc.description.abstract Revenue management practices often include overbooking capacity to account for customers who make reservations but do not show up. In this paper, we consider the network revenue management problem with no-shows and overbooking, where the show-up probabilities are specific to each product. No-show rates differ significantly by product (for instance, each itinerary and fare combination for an airline) as sale restrictions and the demand characteristics vary by product. However, models that consider no-show rates by each individual product are difficult to handle as the state-space in dynamic programming formulations (or the variable space in approximations) increases significantly. In this paper, we propose a randomized linear program to jointly make the capacity control and overbooking decisions with product-specific no-shows. We establish that our formulation gives an upper bound on the optimal expected total profit and our upper bound is tighter than a deterministic linear programming upper bound that appears in the existing literature. Furthermore, we show that our upper bound is asymptotically tight in a regime where the leg capacities and the expected demand is scaled linearly with the same rate. We also describe how the randomized linear program can be used to obtain a bid price control policy. Computational experiments indicate that our approach is quite fast, able to scale to industrial problems and can provide significant improvements over standard benchmarks.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1243
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Network revenue management with product-specific no-shows
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2014-06-03T07:14:27Z
dc.subject.keyword Management and Organization Studies
dc.subject.keyword network revenue management
dc.subject.keyword linear programming
dc.subject.keyword simulation
dc.subject.keyword overbooking
dc.subject.keyword no-shows.
dc.rights.accessRights info:eu-repo/semantics/openAccess


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