The authors formulate and analyze a Markov decision process (dynamic programming) model for airline seat allocation (yield management) on a single-leg flight with multiple fare classes. Unlike previous models, the authors allow cancellation, no-shows, and overbooking. Additionally, they make no assumptions on the arrival patterns for the various fare classes. Under realistic conditions, they demonstrate that an optimal booking policy is characterized by state- and time-dependent booking limits for each fare class. This approach exploits the equivalence to a problem in the optimal control of admission to a queueing system, which has been well studied in the queueing-control literature. Numerical examples show that revenue gains of up to 9 percent are possible with this model, compared with an equivalent model omitting the effects of cancellations and no-shows.

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  • Corporate Authors:

    Institute for Operations Research and the Management Sciences (INFORMS)

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


  • English

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  • Accession Number: 00765492
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jun 7 1999 12:00AM