Approximation of sell-out probability to estimate expected marginal value of capacity

Selçuk A. M., Avşar Z. M.

COMPUTERS & INDUSTRIAL ENGINEERING, vol.151, 2021 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 151
  • Publication Date: 2021
  • Doi Number: 10.1016/j.cie.2020.106930
  • Journal Name: COMPUTERS & INDUSTRIAL ENGINEERING
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, ABI/INFORM, Aerospace Database, Applied Science & Technology Source, Business Source Elite, Business Source Premier, Communication Abstracts, Computer & Applied Sciences, INSPEC, Metadex, DIALNET, Civil Engineering Abstracts
  • Middle East Technical University Affiliated: Yes

Abstract

In this study, the dynamic pricing problem is considered for single-leg airline revenue management. The dynamic programming formulation given for this problem is expressed in terms of the expected marginal revenue of capacity. In order to make the formulation applicable in practice, approximations are proposed in this study for estimating the expected marginal revenue term. Numerical tests based on simulating the sales process show that the proposed approximations work well as compared to the exact dynamic programming model.