Revenue management under general discrete choice model of consumer behavior

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• dc.contributor.author Talluri, Kalyan T.ca
• dc.contributor.author van Ryzin, Garrettca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:50:25Z
• dc.date.available 2017-07-26T10:50:25Z
• dc.date.issued 2000-09-01
• dc.date.modified 2017-07-23T02:06:00Z
• 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.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=533
• dc.identifier.citation Management Science, 50(1):15-33, 2004a
• dc.identifier.uri http://hdl.handle.net/10230/662
• 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.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• 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.subject.keyword Operations Management
• dc.title Revenue management under general discrete choice model of consumer behaviorca
• dc.type info:eu-repo/semantics/workingPaper