Dynamic control mechanisms for revenue management with flexible products

Authors:
Anita Petrick;Jochen Gönsch;Claudius Steinhardt;Robert Klein
Affiliations:
Department of Business Administration, Technische Universität Darmstadt, Hochschulstr. 1, 64289 Darmstadt, Germany;Department of Statistics and Economic Theory, Universität Augsburg, Universitätsstraíe 16, 86159 Augsburg, Germany;Department of Statistics and Economic Theory, Universität Augsburg, Universitätsstraíe 16, 86159 Augsburg, Germany;Department of Statistics and Economic Theory, Universität Augsburg, Universitätsstraíe 16, 86159 Augsburg, Germany
Venue:
Computers and Operations Research
Year:
2010

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Abstract

Revenue management with flexible products has experienced a growing interest in the academic literature within the last few years. Flexible products allow supply-side substitution between resources and can therefore help to maximize overall revenue as well as capacity utilization in markets with highly uncertain demand. This paper addresses the question of how the mathematical models which have been developed for capacity control with flexible products should be used over time to exploit the substitution opportunities, while keeping practical applicability in mind. Several dynamic control mechanisms are proposed, each of which makes use of the flexibility to a different extent. A comprehensive computational study shows the potential of the different approaches by revealing their strengths and weaknesses.