Abstract
In this chapter, we consider the single resource, independent demand revenue management problem with multiple fare classes. This problem arises in the airline industry where different fares for the same cabin are designed to cater to different market segments. As an example, a low fare may have advance purchase and length of stay restrictions and exclude ancillary services such as advance seat selection, luggage handling, and priority boarding. This low fare may target price-conscious consumers who travel for leisure on restricted budgets. On the other hand, a high fare designed for business consumers may be unrestricted, include ancillary services and be designed to be frequently available for late bookings. If requests for the low fare arrive first, the airline risks selling all of its capacity before seeing requests for the high fare. A key decision in revenue management is how much capacity to reserve for higher fare classes, or equivalently how much capacity to make available for lower fare classes. Throughout the chapter, we will refer to airline applications, but the reader should keep in mind that the models apply more generally.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.