Toward Robust Revenue Management: Competitive Analysis of Online Booking

Authors:
Michael O. Ball;Maurice Queyranne
Affiliations:
Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742;Sauder School of Business, University of British Columbia, Vancouver, British Columbia, Canada V6T 1Z2
Venue:
Operations Research
Year:
2009

Citing 11
Cited 12

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Abstract

In this paper, we consider the revenue management problem from the perspective of online algorithms. This approach eliminates the need for both demand forecasts and a risk-neutrality assumption. The competitive ratio of a policy relative to a given input sequence is the ratio of the policy's performance to the offline optimal. Under the online algorithm approach, revenue management policies are evaluated based on the highest competitive ratio they can guarantee. We are able to define lower bounds on the best-possible performance and describe policies that achieve these lower bounds. We address the two-fare problem in greatest detail, but also treat the general multifare problem and the bid-price control problem.