Open AccessA Combined Average-Case and Worst-Case Analysis for an Integrated Hub Location and Revenue Management Problem
Author(s) -
Jiazhen Huo,
Yanze Hou,
Feng Chu,
Junkai He
Publication year - 2019
Publication title -
discrete dynamics in nature and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.264
H-Index - 39
eISSN - 1607-887X
pISSN - 1026-0226
DOI - 10.1155/2019/8651728
Subject(s) - mathematical optimization , revenue management , computer science , profit maximization , revenue , profit (economics) , operations research , maximization , stochastic programming , facility location problem , total revenue , mathematics , economics , microeconomics , finance
This paper investigates joint decisions on airline network design and capacity allocation by integrating an uncapacitated single allocation p-hub median location problem into a revenue management problem. For the situation in which uncertain demand can be captured by a finite set of scenarios, we extend this integrated problem with average profit maximization to a combined average-case and worst-case analysis of this integration. We formulate this problem as a two-stage stochastic programming framework to maximize the profit, including the cost of installing the hubs and a weighted sum of average and worst case transportation cost and the revenue from tickets over all scenarios. This model can give flexible decisions by putting the emphasis on the importance of average and worst case profits. To solve this problem, a genetic algorithm is applied. Computational results demonstrate the outperformance of the proposed formulation.