A Monopolistic and Oligopolistic Stochastic Flow Revenue Management Model

2006 ◽  
Vol 54 (6) ◽  
pp. 1098-1109 ◽  
Author(s):  
Xiaowei Xu ◽  
Wallace J. Hopp
Keyword(s):  
Revenue Management ◽  
Management Model ◽  
Stochastic Flow

Comment on Modified Fare Ratio in a Two-Class Static Revenue Management Model with Buy-up Behavior

2021 ◽  
Author(s):  
Hideaki Takagi
Keyword(s):  
Simple Model ◽  
Revenue Management ◽  
Management Model ◽  
Probabilistic Interpretation ◽  
Numerical Examples ◽  
Expected Revenue

We review the optimal booking limit in the two-class static revenue management model with customers’ buy-up behavior. This is when a deterministic fraction of the low-fare customer class that cannot book early are willing to book the higher fare later. This simple model with dependent demands is difficult to analyze. Some well-known publications, such as Talluri and van Ryzin ( 2004 ) and Phillips ( 2005 ), treat this model incorrectly. In this note, we correct an erroneous formula for the modified fare ratio with the proper probabilistic interpretation. The correction was established previously by Brumelle et al. ( 1990 ). Numerical examples reveal that the corrected modified fare ratio provides a lower optimal booking limit, resulting in a higher expected revenue than those obtained by using the incorrect modified fare ratio.

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