Revenue Mangt

Yield Management

B.S.c. Thesis by

Márta Treszl

Mathematics B.S.c., Mathematical Analyst

Supervisors:

Róbert Fullér

Professor at Åbo Akademi University

Viktória Villányi

Assistant Professor at the Department of Operations Research

Budapest

2012

Table of Contents

Table of Contents

Preface

1

Chapter 1

3

1.1 Introduction……………………………………………………………………………………………………...3

1.2 History of Yield Management…………………………………………………………………………….3

1.3 Levels of Revenue Management………………………………………………………………………..5

1.4 Overview of a revenue management system……………………………………………………..6

1.5 Measuring effectiveness………………………………………………………………………………......7

Chapter 2 : Quantity-based Revenue Management

8

2.1 Introduction……………………………………………………………………………………………………….8

2.2 Capacity Allocation………………………………………………………………………..……………………8

2.2.1 Capacity allocation with independent demand…………………………..…………………9

2.2.1.1 Two-class problem……………………………………………………………………………………9

2.2.1.2 Multiple-fare classes………………………………………………………………………….……12

2.2.2 Capacity Allocation with dependent demands…………..…………………………………15

2.2.2.1 Two fare classes with dependent demands……………… ……………………………16

2.2.2.2 Multiple-fare classes with dependent demands………………………….………….17

2.3 Overbooking……………………………………………………………………………………………………..18

2.3.1 Static Model…………………………………………………………………..………………………….18

2.3.2 Dynamic Booking Limits…………………………………………………………..………………..21

Chapter 3: Price-based Revenue Management

23

3.1 Introduction……………………………………………………………………………………………………..23

3.2 Dynamic Pricing………………………………………………………………..………………………………23

3.2.1 Style- and Seasonal Goods Markdown Pricing……………………..………………….. 23

3.2.2 Discount Airline Pricing………………………………………………………………….………… 24

3.2.3 Consumer-Packaged Goods Promotion……………………..……………………………..24

3.3 Auctions…………………………………………………………………………………….……………………..25

3.3.1 Types of Auctions…………………………………………………………………………………….. 25

Chapter 4: Forecasting

27

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