Basics of Dynamic Programming for Revenue Management [download]
- quotation: Chapuis J.M., 2007, "Basics of Dynamic Programming
for Revenue Management.", Revue Juridique Polynésienne, vol 13.,
to be published
- abstract: The Revenue Management (RM), namely the pricing and
the inventory control of a perishable product, is usually used to
improve services marketing efficiency. While booking a flight, the
manager has to allocate seats to various fare classes. Then, he
has to assess the consequence of a current decision on the future
stream of revenue, i.e. accept an certain incoming reservation or
wait for a possible higher fare demand, but later. Since its practice
becomes omnipresent this last decade, this paper presents some basics
of Dynamic Programming (DP) through the most common model, the dynamic
discrete allocation of a resource to n fare classes. The properties
of the opportunity cost of using a unit of a given capacity, the
key of any RM optimizations, are studied in details.
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