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Optimal booking limits in the presence of strategic consumer behavior
Author(s) -
Wilson John G.,
Anderson Chris K.,
Kim SangWon
Publication year - 2006
Publication title -
international transactions in operational research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.032
H-Index - 52
eISSN - 1475-3995
pISSN - 0969-6016
DOI - 10.1111/j.1475-3995.2006.00537.x
Subject(s) - ticket , business , limit (mathematics) , yield (engineering) , yield management , computer science , marketing , operations research , revenue management , computer security , mathematics , finance , mathematical analysis , materials science , revenue , metallurgy
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.