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Joern Meissner, Arne K Strauss
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| Abstract |
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We present improved network revenue management methods that assume customers to choose according
to the multinomial logit choice model with the specific feature that the sets of considered products of the
different customer segments are allowed to overlap. This approach can be used to model markets with weak
segmentation: For example, high-yield customer segments can be modeled to also consider low yield products
intended for low-yield customers, introducing implicit buy-down behavior into the model.
The arising linear programs are solved using column generation and involve NP-hard mixed integer sub
problems. However, we propose efficient polynomial-time heuristics that considerably speed-up the solution
process. We numerically investigate the effect of varying the intensity of overlap on the respective policies
and find that improvements are most pronounced in the case of high overlap, rendering the method highly
interesting for weakly segmented market applications. |
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| Keywords |
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Revenue Management, Dynamic Programming/Optimal Control: Applications, Approximate.
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| Status |
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Working Paper |
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| Download |
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www.meiss.com/download/RM-Meissner-Strauss-02.pdf
(324 kb) |
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| Reference |
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BibTeX,
Plain Text |
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