Bid-Price Controls for Network Revenue Management: Martingale Characterization of Optimal Bid Prices

We consider a continuous-time, rate-based model of network revenue management. Under mild assumptions, we construct a simple -optimal bid-price control, which can be viewed as a perturbation of a bid-price control in the classical sense [Williamson, E. L. 1992. Airline network seat control. Ph.D. th...

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Vydáno v:Mathematics of operations research Ročník 34; číslo 4; s. 912 - 936
Hlavní autoři: Akan, Mustafa, Ata, Baris
Médium: Journal Article
Jazyk:angličtina
Vydáno: Linthicum INFORMS 01.11.2009
Institute for Operations Research and the Management Sciences
Témata:
Analysis
Bid prices
bid-price controls
Bids
Cost control
Integrands
Martingales
Mathematical functions
Mathematical theorems
Mathematical vectors
network revenue management
Operations research
Optimal solutions
Portfolio management
Price regulations
Pricing
Revenue
Revenue management
Stochastic models
Studies
Trajectories
United States
ISSN:0364-765X, 1526-5471
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Shrnutí:We consider a continuous-time, rate-based model of network revenue management. Under mild assumptions, we construct a simple -optimal bid-price control, which can be viewed as a perturbation of a bid-price control in the classical sense [Williamson, E. L. 1992. Airline network seat control. Ph.D. thesis, MIT, Cambridge, MA]. We show that the associated bid-price process forms a martingale and the corresponding booking controls converge in an appropriate sense to an optimal control as tends to 0. Moreover, we show that there exists an optimal generalized bid-price control, where the bid-price process forms a martingale and is used in conjunction with a capacity usage limit process. We also discuss its connection to the bid-price controls in the classical sense and sufficient conditions for the (near) optimality of the latter.
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ISSN:0364-765X
1526-5471
DOI:10.1287/moor.1090.0411