The Role of Robust Optimization in Single-Leg Airline Revenue Management

Authors:
Ş. İlker Birbil;J. B. G. Frenk;Joaquim A. S. Gromicho;Shuzhong Zhang
Affiliations:
Faculty of Engineering and Natural Sciences, Sabancı University, 34956 Istanbul, Turkey;Erasmus University Rotterdam, Postbus 1738, 3000 DR Rotterdam, The Netherlands;Vrije Universiteit, FEWEB-Econometrie, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands, and ORTEC, Postbus 490, 2800 AL Gouda, The Netherlands;Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, Hong Kong
Venue:
Management Science
Year:
2009

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Abstract

In this paper, we introduce robust versions of the classical static and dynamic single-leg seat allocation models. These robust models take into account the inaccurate estimates of the underlying probability distributions. As observed by simulation experiments, it turns out that for these robust versions the variability compared to their classical counterparts is considerably reduced with a negligible decrease in average revenue.