용량한계와 수요대체를 고려하는 항공편의 최적 좌석용량 할당 및 가격 결정
Optimal Pricing and Seat Capacity Allocations for Airlines in the Presence of Capacity Constraint and Substitution
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Revenue management has played a vital role in airline industries and employed dynamic pricing, demand management, optimization, market segmentation and etc. Estimating the exact demand for demand management requires understanding substituted demand, which is classified as inventory-driven substitution and price-driven substitution. Inventory-driven substitution occurs when a customer cannot purchase the originally requested product due to stock-out and might buy a substitutable product. Substitution also occurs when a customer might purchase a substitutable product if the price of the originally requested product changes, which is known as price-driven substitution. In airline revenue management study, customer diversion is interpreted as a kind of substitution and has been ignored in seat capacity optimization allocation. Also, many revenue management optimization studies ignored capacity limit. We consider a deterministic optimization model for joint decisions of the optimal prices and seat capacity allocations for airlines in the presence of price-driven substitution and a capacity constraint. We show how airlines’ revenue managers should adapt prices in each fare and arrange seat capacity allocation, taking into account price-driven substitution between different fares. We investigate the impact of price-driven substitution and a capacity constraint on pricing and capacity decisions and present analytical findings and numerical examples are provided for the applicability of the optimization model.
Abstract
Revenue management has played a vital role in airline industries and employed dynamic pricing, demand management, optimization, market segmentation and etc. Estimating the exact demand for demand management requires understanding substituted demand, which is classified as inventory-driven substitution and price-driven substitution. Inventory-driven substitution occurs when a customer cannot purchase the originally requested product due to stock-out and might buy a substitutable product. Substitution also occurs when a customer might purchase a substitutable product if the price of the originally requested product changes, which is known as price-driven substitution. In airline revenue management study, customer diversion is interpreted as a kind of substitution and has been ignored in seat capacity optimization allocation. Also, many revenue management optimization studies ignored capacity limit. We consider a deterministic optimization model for joint decisions of the optimal prices and seat capacity allocations for airlines in the presence of price-driven substitution and a capacity constraint. We show how airlines’ revenue managers should adapt prices in each fare and arrange seat capacity allocation, taking into account price-driven substitution between different fares. We investigate the impact of price-driven substitution and a capacity constraint on pricing and capacity decisions and present analytical findings and numerical examples are provided for the applicability of the optimization model.
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