Optimal Booking Limits in the Presence of Strategic Consumer Behavior
MetadataShow full item record
Wilson, John G.; Anderson, Chris K.; Kim, Sang-Won
We consider a two-period airline yield management problem where customers may act strategically. Specifically, we allow for the possibility that a customer may decide to defer purchase in the hope that a ticket cheaper than those currently on offer will become available. We also allow for the possibility that some customers will buy a more expensive ticket if the cheaper tickets are not available. We show how to find optimal booking limits in the presence of such strategic customer behavior. We also explicitly incorporate the fact that, once a booking limit has been reached, demand distributions are now censored distributions.
yield management; strategic behavior; newsvendor problem; censored observations
Required Publisher Statement: © Wiley . Final version published as: Wilson, J. G., Anderson, C. K., & Kim, S. (2006). Optimal booking limits in the presence of strategic consumer behavior. International Transactions in Operational Research, 13(2), 99-110. DOI: 10.1111/j.1475-3995.2006.00537.x. Reprinted with permission. All rights reserved.