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Matthias Koenig, Joern Meissner
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| Abstract |
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Consider a risk-averse decision maker in the setting of a single-leg dynamic revenue management
problem with revenue controlled by limiting capacity for a fixed set of prices. Instead
of focussing on maximising the expected revenue, the decision maker has the main objective
of minimising the risk of failing to achieve a given target revenue.
Interpreting the revenue management problem in the framework of finite Markov decision
processes, we augment the state space of the risk-neutral problem definition and change
the objective function to the probability of failing a certain specified target revenue. This
enables us to obtain a dynamic programming solution which generates the policy minimising
the risk of not attaining this target revenue. We compare this solution with recently
proposed risk-sensitive policies in a numerical study and discuss advantages and limitations. |
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| Keywords |
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Capacity Control, Revenue Management, Multi-Period, Risk, Target Level Criterion
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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-Koenig-Meissner-03.pdf
(414 kb) |
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| Reference |
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BibTeX,
Plain Text |
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