Spring 2007 Seminar Series

DATE: Thursday, April 5, 2007
LOCATION: E40-298
TIME: 4:15pm
Reception immediately following in the Philip M. Morse Reading Room, E40-106

SPEAKER:
Maurice Queyranne

TITLE
Toward Robust Revenue Management: Competitive Analysis of Online Booking

ABSTRACT
We consider revenue management problems from the perspective of online algorithms and competitive analysis. This approach eliminates the need for both demand forecasts and a risk neutrality assumption. The competitive ratio of a policy relative to a given input sequence is the ratio of the policy's performance to the (offline) optimal performance that would be achieved with perfect foresight on that input sequence. We seek policies with the highest possible competitive ratio in the worst case, i.e., providing a performance guarantee which holds for any input sequence. We apply this approach to booking decisions for a single airline flight with given fare classes. We derive lower bounds on the best possible performance and describe policies that closely approach these lower bounds. These policies turn out to be of the nested booking limits type, with reasonable parameters (in spite of the worst case perspective). We argue that this competitive analysis approach can be a useful complement to the traditional, statistically based approaches in situations of significant change or uncertainty. This is joint work with Professor Michael O. Ball, Decision and Information Technologies Department, University of Maryland.