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Choice-Based Network Revenue Management under Weak Market Segmentation

Meissner, J and Strauss, A K (2009) Choice-Based Network Revenue Management under Weak Market Segmentation. Working Paper. The Department of Management Science, Lancaster University.

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    We present improved network revenue management methods that assume customers to choose according to the multinomial logit choice model with the specific feature that the sets of considered products of the different customer segments are allowed to overlap. This approach can be used to model markets with weak segmentation: For example, high-yield customer segments can be modeled to also consider low yield products intended for low-yield customers, introducing implicit buy-down behavior into the model. The arising linear programs are solved using column generation and this involves NP-hard mixed integer sub problems. However, we propose efficient polynomial-time heuristics that considerably speed-up the solution process. We numerically investigate the effect of varying the intensity of overlap on the respective policies and find that improvements are most pronounced in the case of high overlap, rendering the method highly interesting for weakly segmented market applications.

    Item Type: Monograph (Working Paper)
    Uncontrolled Keywords: Revenue Management ; Dynamic Programming/Optimal Control: Applications ; Approximate
    Departments: Lancaster University Management School > Management Science
    ID Code: 48984
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 22:26
    Refereed?: No
    Published?: Published
    Last Modified: 25 Jun 2018 01:24
    Identification Number:

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