THE UNDERLYING MARKOV DECISION PROCESS IN THE SINGLE-LEG AIRLINE YIELD-MANAGEMENT PROBLEM

The authors introduce the terms dynamic and static, respectively, to identify the prevailing approaches to the single-leg airline yield-management problem: those allowing customers of different fare classes to book concomitantly (dynamic), and those assuming that the demands for the different fare classes arrive separately in a predetermined order (static). The authors develop a discrete-time Markov decision process formulation mirroring that of Janakiram et al. Transportation Science, 33, 147-167 (1999) to solve the single-leg problem without cancellations, overbooking, or discounting. Borrowing a result from the queueing-control literature, the authors prove the concavity of the associated optimal value functions and, subsequently, the optimality of a booking limit policy. They then apply this same technique to the more influential papers from the single-leg literature, at once unifying the static and dynamic models and establishing the connection between the yield-management and queueing-control problems.

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    Institute for Operations Research and the Management Sciences (INFORMS)

    901 Elkridge Landing Road, Suite 400
    Linthicum, MD  United States  21090-2909
  • Authors:
    • Lautenbacher, C J
    • Stidham, S
  • Publication Date: 1999-5

Language

  • English

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Filing Info

  • Accession Number: 00765491
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jun 7 1999 12:00AM