A split-graph and cutting-plane approach to optimal pricing and seat inventory control in origin-destination networks /
Yield management is a sophisticated marketing tool used by airlines to establish pricing and seat allocation strategies that maximize their revenues. Airlines offer a wide variety of fare classes to preserve their regular passengers, reduce unused seats by attracting lower fare passengers, and be c...
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| Format: | Thesis Book |
| Language: | English |
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[Place of publication not identified] :
[publisher not identified] ;
1996.
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| Online Access: | http://proxy.library.tamu.edu/login?url=http://proquest.umi.com/pqdweb?did=739363291&sid=1&Fmt=2&clientId=2945&RQT=309&VName=PQD |
| Summary: | Yield management is a sophisticated marketing tool used by airlines to establish pricing and seat allocation strategies that maximize their revenues. Airlines offer a wide variety of fare classes to preserve their regular passengers, reduce unused seats by attracting lower fare passengers, and be competitive in the marketplace. However, pricing and seat allocation policies must be formulated in consistency with restrictions imposed by the airline's computer reservation system (CRS), which limits the number of fare classes. Current yield management procedures either allocate seats based on predetermined price levels or set prices based on predetermined seat allocation levels. In this dissertation, an optimization procedure for joint pricing and seat allocation is developed for O-D networks considering demand forecasts, CRS restrictions on the number of fare classes, and aircraft capacities. This research provides a decision-support tool for pricing designers to be able to consider a variety of possibilities concerning the number of fare classes. Three equivalent optimization models are formulated. The first model is a 0-1 integer programming model. The second model is derived from the first model using the technique of constraint aggregation. The third model is formulated by exploiting the special data structure of the first model and utilizing the concepts of split graph and cutting planes. The third model is found to be a tighter formulation than that provided by each of the first and second model. This follows from the fact that the convex hull of the linear programming relaxation of the third model is contained within the convex hull of the linear programming relaxation of either the first or second model. The proposed algorithm is a three-phase procedure for solving the third model. The first phase reduces the number of seat allocation variables by two problem-specific preprocessing techniques. The second phase eliminates a single price structure variable from each origin destination market. The final phase initiates a specialized branch-and bound procedure and identifies the optimal solution to the problem under investigation. Tests for the proposed solution methodology have been conducted using a set of randomly generated problems. These problems were created based on hypothetical networks of flights. The proposed procedure achieved significantly more attractive computational results than any procedure using either the first or second model. |
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| Item Description: | Vita. "Major Subject: Industrial Engineering". |
| Physical Description: | xi, 73 leaves : illustrations ; 28 cm. Issued also on microfiche from University Microfilms Inc. |
| Bibliography: | Includes bibliographical references: pages 55-58. |