Network revenue management is concerned with managing demand for products that require inventory from one or several resources by controlling product availability and/or prices in order to maximize expected revenues subject to the available resource capacities. One can tackle this problem by decomposing it into resource-level subproblems that can be solved efficiently, for example by dynamic programming. We propose a new dynamic fare proration method specifically having large-scale applications in mind.
It decomposes the network problem by fare proration and solves the resource-level dynamic programs simultaneously using simple, endogenously obtained dynamic marginal capacity value estimates to update fare prorations over time. An extensive numerical simulation study demonstrates that the method results in tightened upper bounds on the optimal expected revenue, and that the obtained policies are very effective with regard to achieved revenues and required runtime. (joint work with P. Kemmer and T. Winter, both Lufthansa Systems)
Dr. Arne K. Strauss is Assistant Professor of Operational Research in the ORMS Group at Warwick Business School. Previously, he held a position as Senior Research Associate under the LANCS Initiative at Lancaster University's Department of Management Science where he completed the Ph.D. program in 2009 under supervision of Prof. Joern Meissner and Prof. Kevin Glazebrook. From October 2009 until September 2010, he held an EPSRC PhD Plus fellowship at Lancaster. Before beginning his doctoral studies, he obtained a Master's degree in mathematics from Virginia Tech, USA, as well as a diploma (equivalent to Master degree) in mathematics and business administration from the University of Trier, Germany, in 2006.
During his doctoral studies, his main research area was revenue optimization involving models of customer choice; an interest that he continues to pursue with various on-going projects, including industrial collaborations e.g. with Lufthansa Systems. He won the doctoral prize of the Operational Research Society for the best PhD dissertation 2009, the departmental prize for the best doctoral researcher 2010 and an honorable mention at the AGIFORS Anna Valicek student paper competition 2009. A paper resulting from his master thesis in the area of option pricing received the "Most Successful 2008 IMACS Paper Award" in the journal Applied Numerical Mathematics. Please visit his homepage for more information.
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