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Discrete choice modelling in airline network management
Author(s) -
Grammig Joachim,
Hujer Reinhard,
Scheidler Michael
Publication year - 2005
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.799
Subject(s) - task (project management) , computer science , operations research , revenue management , discrete choice , multinomial probit , schedule , probit , revenue , point (geometry) , probit model , econometrics , economics , finance , machine learning , geometry , mathematics , management , operating system , engineering
The task of airline network management is to develop new flight schedule variants and evaluate them in terms of expected passenger demand and revenue. Given the industry's trend towards global cooperation, this is especially important when evaluating the potential synergies with alliance partners. From the econometric point of view, this task represents a discrete choice modelling problem in which one has to account for a large number of dependent alternatives. In this paper we discuss the applicability of recently proposed approaches and introduce a new multinomial probit specification designed for the airline network management task. The superior performance of the new model is demonstrated in a real‐world application using airline bookings data. Copyright © 2005 John Wiley & Sons, Ltd.