A Monopolistic and Oligopolistic Stochastic Flow Revenue Management Model
Operations Research
Stochastic Comparisons in Airline Revenue Management
Manufacturing & Service Operations Management
Feasting on Leftovers: Strategic Use of Shortages in Price Competition Among Differentiated Products
Manufacturing & Service Operations Management
Dynamic Revenue Management in Airline Alliances
Transportation Science
Myopic Solutions of Homogeneous Sequential Decision Processes
Operations Research
TECHNICAL NOTE---Robust Newsvendor Competition Under Asymmetric Information
Operations Research
Network capacity management under competition
Computational Optimization and Applications
Seat inventory control for sequential multiple flights with customer choice behavior
Computers and Industrial Engineering
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A well-studied problem in the literature on airline revenue (or yield) management is the optimal allocation of seat inventory among fare classes, given a demand distribution for each class. In practice, the seat allocation decisions of one airline affect the passenger demands for seats on other airlines. In this paper, we examine the seat inventory control problem under both horizontal competition (two airlines compete for passengers on the same flight leg) and vertical competition (different airlines fly different legs on a multileg itinerary). Such vertical competition can be the outcome of a code-sharing agreement between airlines, because each airline sells seats on the partner airlines' flights but the airlines are unwilling, or unable, to coordinate yield management decisions. We provide a general sufficient condition under which a pure-strategy Nash equilibrium exists in these revenue management games, and we also compare the total number of seats available in each fare class with, and without, competition. Analytical results as well as numerical examples demonstrate that more seats are protected for higher-fare passengers under horizontal competition than when a single airline acts as a monopoly. Under vertical competition the booking limit may be higher or lower, however, than the monopoly level, depending on the demand for connecting flights in each fare class. Finally, we discuss revenue-sharing contracts that coordinate the actions of both airlines.