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Revenue management without forecasting or optimization: an adaptive algorithm for determining airline seat protection levels. (English) Zbl 1231.90414
Summary: We investigate a simple adaptive approach to optimizing seat protection levels in airline revenue management systems. The approach uses only historical observations of the relative frequencies of certain seat-filling events to guide direct adjustments of the seat protection levels in accordance with the optimality conditions of S. L. Brumelle and J. I. McGill [Oper. Res. 41, No. 1, 127–137 (1993; Zbl 0775.90148)]. Stochastic approximation theory is used to prove the convergence of this adaptive algorithm to the optimal protection levels. In a simulation study, we compare the revenue performance of this adaptive approach to a more traditional method that combines a censored forecasting method with a common seat allocation heuristic (EMSR-b).

MSC:
90C90 Applications of mathematical programming
90B06 Transportation, logistics and supply chain management
90C15 Stochastic programming
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