To formulate a single-leg seat inventory control problem in an airline ticket sales system, the concept and techniques of revenue management are applied in this research. In this model, it is assumed the cabin capacity is stochastic and hence its exact size cannot be forecasted in advance, at the time of planning. There are two groups of early-reserving and late-purchasing customers demanding t...

In this paper we consider the airline seat allocation between high and low fares with and without stochastic cancellations. We also analyze the problem of simultaneously determining seat allocation and overbooking levels for two different classes of passengers, which also extends the existing literature in three ways. First, the cost oflost sales, which has been ignored in the existing literatu...

We construct several models to examine the effect of overbooking policies on airline revenue and costs in light of the current state of the industry, including fewer flights, increased security, passengers’ fear, and billions in losses. Using a plausible average ticket price, we model the waiting-time distribution for flights and estimate the average cost per involuntarily bumped passenger. For...

We develop an overbooking approach for airline revenue management. We estimate a revenue function by employing a statistical modeling approach, specifically a multivariate adaptive regression splines approximation of a stochastic network model. We develop an overbooking cost function using a binomial distribution to model the number of customers that show up for the flight. We implement a hybri...

This study presents an optimization model that uses stochastic programming to optimally allocate seats and maximize the profit of airline, considering overbooking. Airline seat inventory control involves selling right people at time. If airline sells tickets on a first-come, first-serve basis, it is likely be occupied by leisure travelers late bookers. Therefore, business willing pay higher far...

The spiral-down effect occurs when incorrect assumptions about customer behavior cause high-fare ticket sales, protection levels, and revenues to systematically decrease over time. If an airline decides how many seats to protect for sale at a high fare based on past high-fare sales, while neglecting to account for the fact that availability of low-fare tickets will reduce high-fare sales, then ...

In this paper, we develop a revenue management model to jointly make the capacity allocation and overbooking decisions over an airline network. Our approach begins with the dynamic programming formulation of the capacity allocation and overbooking problem and uses an approximation strategy to decompose the dynamic programming formulation by the flight legs. This decomposition idea opens up the ...

The competitors in the airline industry often rely on pricing strategy to capture more sales as a main mean of competition. Thus, dynamic pricing is often utilized to maximize profit while allowing better pricing against competition at the same time. In order for dynamic pricing to be effective, airline company has to take in consideration both internal and external information. Tactical pricin...

Large body of recent work has been devoted to multi-agent systems utilized in e-commerce scenarios. In particular, autonomous software agents participating in auctions have attracted a lot of attention. Interestingly, most of these studies involve purely virtual scenarios. In an initial attempt to fill this gap we discuss a model agent-based e-commerce system modified to serve as an airline tic...

We consider optimal pricing policies for airlines when passengers are uncertain at the time of ticketing of their eventual willingness to pay for air travel. Auctions at the time of departure efficiently allocate space and a profit maximizing airline can capitalize on these gains by overbooking flights and repurchasing excess tickets from those passengers whose realized value is low. Neverthele...