In this paper, we examine the research and results of dynamic pricing policies and their relation to revenue management. The survey is based on a generic revenue management problem in which a perishable and nonrenewable set of resources satisfy stochastic price sensitive demand processes over a finite period of time. In this class of problems, the owner (or the seller) of these resources uses them to produce and offer a menu of final products to the end customers. Within this context, we formulate the stochastic control problem of capacity that the seller faces: How to dynamically set the menu and the quantity of products and their corresponding prices to maximize the total revenue over the selling horizon.

https://pages.stern.nyu.edu/~rcaldent/papers/Abstract-Survey-Paper-MSOM.pdf

Commissioned Paper: An Overview of Pricing Models for Revenue Management

The paper provides a comprehensive review of the recent development of revenue management in different industries. We discuss research on different revenue management strategies including pricing, auctions, capacity control, overbooking and forecasting. Related issues such as economic concerns, customer perception, competition and consolidation, implementation, performance evaluation, and common techniques and approaches used for solving revenue management problems are also discussed. Finally, we give our suggestion on some important areas that warrant further research.

An overview of research on revenue management: current issues and future research

This paper presents an overview of several important areas of operations research applications in the air transport industry. Specific areas covered are: the various stages of aircraft and crew schedule planning; revenue management, including overbooking and leg-based and network-based seat inventory management; and the planning and operations of aviation infrastructure (airports and air traffic management). For each of these areas, the paper provides a historical perspective on OR contributions, as well as a brief summary of the state of the art. It also identifies some of the main challenges for future research.

https://pubsonline.informs.org/doi/pdf/10.1287/trsc.37.4.368.23276

Applications of Operations Research in the Air Transport Industry

A Comparison of Forecasting Methods for Hotel Revenue Management

A flexible product is a menu of two or more alternatives products serving the same market. Purchasers of flexible products are assigned to one of the alternatives at a later date. Gallego and Phillips show that capacitated suppliers, such as airlines and hotels, can potentially improve revenue by offering flexible products in addition to traditional specific products. In this paper, we extend the concept of flexible products to networks. We study the network revenue management problem with flexible products in two different settings: one where the demand for each product is independently and exogenously generated; and the other where the demand is driven by a consumer choice model. We show that in both these settings the optimal value of the stochastic optimization problem can be closely approximated by the optimal value of a deterministic linear program. In the independent demand case the corresponding linear program is of modest size. When the demand is driven by a customer choice model, the linear program has exponentially many variables; however, we show that for an important class of consumer choice models the linear program can be efficiently solved using column-generation. We report the findings of numerical experiments with a real airline subnetwork and show how the results vary as a function of the key inputs.

/pdf/managing-flexible-products-on-a-network-kb9qkh1vfj.pdf

Managing Flexible Products on a Network

This paper won the 2004 Revenue Management and Pricing Section Historical Prize awarded by INFORMS. Written in 1972, it describes the early work on applying mathematical models to the development of revenue management in the airline industry. It describes methods of passenger forecasting and revenue control — and introduces the idea of maximising the revenue received on a particular flight, rather than maximising the number of passengers carried. It is considered a seminal work in the field of revenue management, and establishes the foundations for many of the yield control models which have been subsequently developed. It was presented at the 12th AGIFORS Symposium in October 1972.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.rpm.5170134.pdf

Ken Littlewood

Papers

Special Issue Papers: Forecasting and control of passenger bookings