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Title: A Markov model for single-leg air cargo revenue management under a bid-price policy
Authors: Han, D.L.
Tang, L.C. 
Huang, H.C. 
Keywords: OR in airlines
Revenue management
Issue Date: 1-Feb-2010
Citation: Han, D.L., Tang, L.C., Huang, H.C. (2010-02-01). A Markov model for single-leg air cargo revenue management under a bid-price policy. European Journal of Operational Research 200 (3) : 800-811. ScholarBank@NUS Repository.
Abstract: In this paper, we consider the capacity allocation problem in single-leg air cargo revenue management. We assume that each cargo booking request is endowed with a random weight, volume and profit rate and propose a Markovian model for the booking request/acceptance/rejection process. The decision on whether to accept the booking request or to reserve the capacity for future bookings follows a bid-price control policy. In particular, a cargo will be accepted only when the revenue from accepting it exceeds the opportunity cost, which is calculated based on bid prices. Optimal solutions are derived by maximizing a reward function of a Markov chain. Numerical comparisons between the proposed approach and two existing static single-leg air cargo capacity allocation policies are presented. © 2009 Elsevier B.V. All rights reserved.
Source Title: European Journal of Operational Research
ISSN: 03772217
DOI: 10.1016/j.ejor.2009.02.001
Appears in Collections:Staff Publications

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