The Theory and Practice of Revenue Management,9781402077012

The Theory and Practice of Revenue Management

by ;
ISBN13: 9781402077012
ISBN10: 1402077017
Format: Hardcover
Pub. Date: 2004-06-24
Publisher(s): Kluwer Academic Pub
List Price: $419.99

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Summary

The Theory and Practice of Revenue Management is a book that comprehensively covers theory and practice of the entire field, including both quantity and price-based RM, as well as significant coverage of supporting topics such as forecasting and economics. The authors believe such a comprehensive approach is necessary to fully understand the subject. A central objective of the book is to unify the various forms of RM and to link them closely to each other and to the supporting fields of statistics and economics. Nevertheless, the topics and coverage do reflect choices about what is important to understand RM. Hence, the book's purpose is to provide a comprehensive, accessible synthesis of the state-of-the-art in Revenue Management.

Table of Contents

Dedication v
List of Figures
xvii
List of Tables
xxi
Preface xxv
Acknowledgments xxxi
Introduction
1(26)
What Is ``RM''?
1(5)
Demand-Management Decisions
2(2)
What's New About RM?
4(2)
The Origins of RM
6(5)
Airline History
6(4)
Consequences of the Airline History
10(1)
A Conceptual Framework for RM
11(6)
The Multidimensional Nature of Demand
11(1)
Linkages Among Demand-Management Decisions
12(1)
Business Conditions Conductive to RM
13(3)
Industry Adopters Beyond the Airlines
16(1)
An Overview of a RM System
17(1)
The State of the RM Profession
18(2)
Chapter Organization and Reading Guide
20(3)
Chapter Organization
20(2)
Reading Guide
22(1)
Notes and Sources
23(4)
Part I Quantity-based RM
Single-Resource Capacity Control
27(54)
Introduction
27(6)
Types of Controls
28(4)
Displacement Cost
32(1)
Static Models
33(17)
Littlewood's Two-Class Model
35(1)
n-Class Models
36(5)
Computational Approaches
41(3)
Heuristics
44(6)
Adaptive Methods
50(6)
Adaptive Algorithm
50(2)
A Numerical Comparison with EMSR and Censored Forecasting
52(4)
Group Arrivals
56(1)
Dynamic Models
57(5)
Formulation and Structural Properties
58(1)
Optimal Policy
59(3)
Customer-Choice Behavior
62(13)
Buy-Up Factors
62(2)
Discrete-Choice Models
64(11)
Notes and Sources
75(6)
Network Capacity Control
81(48)
Introduction
81(6)
The Promise and Challenge of Network Control
82(1)
Types of Controls
83(4)
The Theory of Optimal Network Controls
87(5)
The Structure of Optimal Controls
88(1)
Bid Price Controls
89(1)
Nonoptimality of Bid-Price Controls
90(1)
Evidence in Support of Bid Prices
91(1)
Bid Prices and Opportunity Cost
91(1)
Approximations Based on Network Models
92(8)
The Deterministic Linear Programming Model
93(2)
The Probabilistic Nonlinear Programming Model
95(3)
The Randomized Linear Programming Model
98(2)
Approximations Based on Decomposition
100(11)
OD Factors Method
101(1)
Prorated EMSR
102(1)
Displacement-Adjusted Virtual Nesting (DAVN)
103(4)
Dynamic Programming Decomposition
107(1)
Iterative Decomposition Methods
108(3)
Stochastic Gradient Methods
111(7)
Continuous Model with Gradient Estimates
112(4)
Discrete Model with First-Difference Estimates
116(2)
Asymptotic Analysis of Network Problems
118(3)
Asymptotic Optimality of Partitioned Controls
118(2)
Asymptotic Optimality of Bid-Price Controls
120(1)
Comments on Asymptotic Optimality
120(1)
Decentralized Network Control: Airline Alliances
121(1)
Notes and Sources
122(7)
Overbooking
129(46)
Business Context and Overview
130(8)
A History of Legal Issues in Airline Overbooking
131(4)
Managing Denied-Service Occurrences
135(2)
Lessons Beyond the Airline Industry
137(1)
Static Overbooking Models
138(14)
The Binomial Model
139(8)
Static-Model Approximations
147(2)
Customer Class Mix
149(1)
Group Cancellations
150(2)
Dynamic Overbooking Models
152(3)
Exact Approaches
152(2)
Heuristic Approaches Based on Net Bookings
154(1)
Combined Capacity-Control and Overbooking Models
155(6)
Exact Methods for No-Shows
156(2)
Class-Dependent No-Show Refunds
158(1)
Exact Methods for Cancellations
159(1)
Class-Dependent Cancellation Refunds
160(1)
Substitutable Capacity
161(5)
Model and Formulation
162(2)
Joint Optimal Overbooking Levels
164(2)
Network Overbooking
166(2)
Notes and Sources
168(7)
Part II Price-based RM
Dynamic Pricing
175(66)
Introduction and Overview
175(12)
Price versus Quantity-Based RM
176(1)
Industry Overview
177(2)
Examples of Dynamic Pricing
179(3)
Modeling Dynamic Price-Sensitive Demand
182(5)
Single-Product Dynamic Pricing Without Replenishment
187(22)
Deterministic Models
188(12)
Stochastic Models
200(9)
Single-Product Dynamic Pricing with Replenishment
209(6)
Deterministic Models
209(3)
Stochastic Models
212(3)
Multiproduct, Multiresource Pricing
215(8)
Deterministic Models Without Replenishment
216(2)
Deterministic Models with Replenishment
218(1)
Stochastic Models
219(1)
Action-Space Reductions
220(3)
Finite-Population Models and Price Skimming
223(6)
Myopic Customers
223(3)
Strategic Customers
226(3)
Promotions Optimization
229(6)
An Overview of Promotions
229(3)
Retailer Promotions
232(2)
Trade-Promotion Models
234(1)
Notes and Sources
235(6)
Auctions
241(60)
Introduction and Industry Overview
241(6)
An Overview of Auctions in Practice
242(3)
Types of Auctions
245(2)
Independent Private-Value Theory
247(25)
Independent Private-Value Model and Assumptions
247(1)
An Informal Analysis of Sealed-Bid, First- and Second-Price Auctions
248(6)
Formal Game-Theoretic Analysis
254(3)
Revenue Equivalence
257(2)
Optimal Auction Design
259(3)
Relationship to List Pricing
262(4)
Departures from the Independent Private-Value Model
266(6)
Optimal Dynamic Single-Resource Capacity Auctions
272(8)
Formulation
272(2)
Optimal Dynamic Allocations and Mechanisms
274(4)
Comparisons with Traditional RM
278(2)
Optimal Dynamic Auctions with Replenishment
280(8)
Dynamic Programming Formulation
281(1)
Optimal Auction and Replenishment Policy
282(2)
Average-Profit Criterion
284(1)
Comparison with a List-Price Mechanism
285(3)
Network Auctions
288(6)
Problem Definition and Mechanism
289(1)
Equilibrium Analysis
290(1)
Relationship to Traditional Auctions
291(1)
Relationship to Traditional Network RM
291(2)
Revenue Maximization and Reserve Prices
293(1)
Notes and Sources
294(7)
Part III Common Elements
Customer-Behavior and Market-Response Models
301(32)
The Independent-Demand Model
301(2)
Models of Individual Customer Choice
303(7)
Reservation-Price Models
303(1)
Random-Utility Models
304(4)
Customer Heterogeneity and Segmentation
308(2)
Models of Aggregate Demand
310(20)
Demand Functions and Their Properties
311(9)
Multiproduct-Demand Functions
320(1)
Common Demand Functions
321(6)
Stochastic-Demand Functions
327(3)
Rationing Rules
330(1)
Notes and Sources
330(3)
The Economics of RM
333(74)
Introduction
333(3)
Perfect Competition
336(13)
Perfectly Competitive Markets
336(2)
Firm-Level Decisions Under Perfect Competition
338(1)
Precommitment and Demand Uncertainty
338(3)
Peak-Load Pricing Under Perfect Competition
341(1)
Identifiable Peak Periods
341(2)
Uncertainty over the Timing of Peak Loads
343(2)
Advance Purchases in Competitive Markets
345(4)
Monopoly Pricing
349(26)
Single-Price Monopoly
350(1)
Monopoly with Capacity Constraints
351(1)
Multiple-Price Monopoly and Price Discrimination
352(11)
Strategic Customer Behavior
363(6)
Optimal Mechanism Design for a Monopolist
369(3)
Advance Purchases and Peak-Load Pricing Under Monopoly
372(3)
Price and Capacity Competition in an Oligopoly
375(27)
Static Models
376(12)
Dynamic Models
388(7)
Product Differentiation
395(7)
Notes and Sources
402(5)
Estimation and Forecasting
407(108)
Introduction
407(12)
The Forecasting Module of RM Systems
408(2)
What Forecasts Are Required?
410(2)
Data Sources
412(3)
Design Decisions
415(4)
Estimation Methods
419(14)
Estimators and Their Properties
420(2)
MSE Estimators
422(3)
Maximum-Likelihood (ML) Estimators
425(2)
Method of Moments and Quantile Estimators
427(1)
Endogeneity, Heterogeneity, and Competition
428(5)
Forecasting Methods
433(40)
Ad-Hoc Forecasting Methods
434(5)
Time-Series Forecasting Methods
439(3)
Stationary Time-Series Models
442(5)
Nonstationary Time-Series Models
447(2)
Box-Jenkins Identification Process
449(1)
Bayesian Forecasting Methods
450(8)
State-Space Models and Kalman Filtering
458(6)
Machine-Learning (Neural-Network) Methods
464(6)
Pick-up Forecasting Methods
470(2)
Other Methods
472(1)
Combining Forecast Methods
472(1)
Data Incompleteness and Unconstraining
473(13)
Expectation-Maximization (EM) Method
474(7)
Gibbs Sampling
481(2)
Kaplan-Meir Product-Limit Estimator
483(1)
Plotting Procedures
484(1)
Projection-Detruncation Method
485(1)
Error Tracking and System Control
486(13)
Estimation Errors
487(9)
Forecasting Errors and System Control
496(3)
Industry Models of RM Estimation and Forecasting
499(12)
Airline No-Show and Cancellations Forecasting
499(3)
Groups Demand and Utilization Forecasting
502(2)
Sell-Up and Recapture Forecasting
504(1)
Retail Sales Forecasting
505(3)
Media Forecasting
508(2)
Gas-Load Forecasting
510(1)
Notes and Sources
511(4)
Industry Profiles
515(64)
Airlines
515(9)
History
515(1)
Customers, Products, and Pricing
516(5)
RM Practice
521(3)
Hotels
524(7)
Customers, Products, and Pricing
524(2)
RM Practice
526(5)
Rental Car
531(2)
Customers, Products, and Pricing
531(1)
RM Practice
532(1)
Retailing
533(9)
Customers, Products, and Pricing
534(7)
RM Practice
541(1)
Media and Broadcasting
542(4)
Customers, Products, and Pricing
543(2)
RM Practice
545(1)
Natural-Gas Storage and Transmission
546(5)
Customers, Products, and Pricing
547(3)
RM Practice
550(1)
Electricity Generation and Transmission
551(4)
Industry Structure
552(2)
Customers, Products, and Pricing
554(1)
RM Practice
554(1)
Tour Operators
555(4)
Customers, Products, and Pricing
556(1)
Capacity Management and Base-Price Setting
556(2)
RM Practice
558(1)
Casinos
559(1)
Customers, Products, and Pricing
559(1)
RM Practice
559(1)
Cruise Ships and Ferry Lines
560(1)
Customers, Products, and Prices
560(1)
RM Practice
561(1)
Passenger Railways
561(2)
Customers, Products, and Pricing
561(2)
RM Practice
563(1)
Air Cargo
563(1)
Customers, Products, and Pricing
563(1)
RM Practice
563(1)
Freight
564(3)
Customers, Products, and Pricing
565(1)
RM Practice
566(1)
Theaters and Sporting Events
567(7)
Customers, Products, and Pricing
567(1)
Ticket Scalping and Distribution
567(4)
RM Practice
571(3)
Manufacturing
574(2)
Customers, Products, and Pricing
574(1)
RM Practice
575(1)
Notes and Sources
576(3)
Implementation
579(52)
Segmentation and Product Design
579(15)
Segmentation
580(5)
Product Design
585(9)
System Architecture, Hardware, Software, and Interfaces
594(14)
Hardware Requirements
594(1)
User-Interface Design
594(4)
GDS, CRS, and PMS Interfaces
598(7)
Retail Management Systems
605(3)
Revenue-Opportunity Assessment and Revenue-Benefits Measurement
608(3)
Revenue-Opportunity Assessment
608(2)
Revenue-Benefits Measurement
610(1)
RM Simulation
611(3)
Generating Aggregate Number of Customers
613(1)
Generating the Customer-Arrival Pattern
613(1)
Customer Perceptions and Reactions
614(6)
RM Perception Problems
614(4)
Managing Perceptions
618(1)
Overbooking Perceptions
619(1)
Cultural, Organizational, and Training Issues
620(8)
Changes in Responsibility by Function
620(3)
Project and Organizational Structure
623(4)
Training
627(1)
Notes and Sources
628(3)
Appendices
631(40)
A Notation
631(4)
B Probability
635(8)
C Convexity and Optimization
643(8)
D Dynamic Programming
651(6)
E The Theory of Choice
657(10)
F Game Theory
667(4)
References 671(38)
Index 709

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