Spring 2007 Seminar Series

DATE: Thursday, March 15, 2007
LOCATION: E40-298
TIME: 4:15pm
Reception immediately following in the Philip M. Morse Reading Room, E40-106

SPEAKER:
Baris Ata

TITLE
Bid Price Controls for Network Revenue Management

ABSTRACT
We consider a continuous-time model of network revenue management. Under mild assumptions, we first show that there exists an optimal generalized bid-price control where the bid-price process forms a martingale and is used in conjunction with a permissible capacity process. We also discuss its connection to the bid-price controls in the Talluri & van Ryzin (1998) sense, and provide sufficient conditions for the (near) optimality of the latter. Second, we construct an epsilon-optimal bid-price control, where the associated bid-price process forms a martingale. Moreover, the epsilon-optimal bid-price control can be viewed as a perturbation of a bid-price control in the Talluri & Van Ryzin (1998) sense. Third, we show how an epsilon-optimal bid-price control and the corresponding solution to the continuous-time network revenue management problem can be characterized as a solution to a Forward-Backward Stochastic Differential Equation. Finally, we discuss the important special case of continuous information, where one can employ the machinery of Ito calculus..

 

Joint work with Mustafa Akan