Revenue management under general discrete choice model of consumer behavior

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Management Science, 50(1):15-33, 2004a
http://hdl.handle.net/10230/662
To cite or link this document: http://hdl.handle.net/10230/662
dc.contributor.author Talluri, Kalyan
dc.contributor.author van Ryzin, Garrett
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.issued 2000-09-01
dc.identifier.citation Management Science, 50(1):15-33, 2004a
dc.identifier.uri http://hdl.handle.net/10230/662
dc.description.abstract Customer choice behavior, such as 'buy-up' and 'buy-down', is an important phe-nomenon in a wide range of industries. Yet there are few models or methodologies available to exploit this phenomenon within yield management systems. We make some progress on filling this void. Specifically, we develop a model of yield management in which the buyers' behavior is modeled explicitly using a multi-nomial logit model of demand. The control problem is to decide which subset of fare classes to offer at each point in time. The set of open fare classes then affects the purchase probabilities for each class. We formulate a dynamic program to determine the optimal control policy and show that it reduces to a dynamic nested allocation policy. Thus, the optimal choice-based policy can easily be implemented in reservation systems that use nested allocation controls. We also develop an estimation procedure for our model based on the expectation-maximization (EM) method that jointly estimates arrival rates and choice model parameters when no-purchase outcomes are unobservable. Numerical results show that this combined optimization -estimation approach may significantly improve revenue performance relative to traditional leg-based models that do not account for choice behavior.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 533
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 Revenue management under general discrete choice model of consumer behavior
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2014-06-03T07:14:04Z
dc.subject.keyword Operations Management
dc.subject.keyword yield management
dc.subject.keyword revenue management
dc.subject.keyword discrete choice theory
dc.subject.keyword airlines
dc.subject.keyword dynamic programming
dc.rights.accessRights info:eu-repo/semantics/openAccess


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