Computing Time-Dependent Bid-Prices in Network Revenue Management Problems
By Sumit Kunnumkal, Huseyin Topaloglu
Transportation Science | February 2010
DOI
pubsonline.informs.org/doi/epdf/10.1287/trsc.1090.0291
Citation
Kunnumkal, Sumit., Huseyin Topaloglu. Computing Time-Dependent Bid-Prices in Network Revenue Management Problems Transportation Science pubsonline.informs.org/doi/epdf/10.1287/trsc.1090.0291.
Copyright
Transportation Science, 2010
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Abstract
We propose a new method to compute bid prices in network revenue management problems. The novel aspect of our method is that it naturally provides dynamic bid prices that depend on how much time is left until departure. We show that our method provides an upper bound on the optimal total expected revenue and that this upper bound is tighter than the one provided by the widely known deterministic linear programming approach. Furthermore, it is possible to use the bid prices computed by our method as a starting point in a dynamic programming decomposition-like idea to decompose the network revenue management problem by the flight legs and to obtain dynamic and capacity-dependent bid prices. Our computational experiments indicate that the proposed method improves on many standard benchmarks.

Sumit Kunnumkal is a Professor and Area Leader of Operations Management at the Indian School of Business (ISB). He holds a PhD in Operations Research from Cornell University. He received his MS in Transportation from the Massachusetts Institute of Technology and a B.Tech in Civil Engineering from the Indian Institute of Technology, Madras.

Professor Kunnumkal has previously taught at the Smith School of Business, Queen’s University, and has held visiting positions at the Singapore University of Technology and Design and Universitat Pompeu Fabra. His research interests lie in the areas of pricing and revenue management, retail operations, assortment planning, and approximate dynamic programming.

At ISB, he has taught in the PGP programme, the Fellow programme, and various Advanced Management and Executive Education programmes.

Sumit Kunnumkal
Sumit Kunnumkal