Overbooking with transference option for flights

Previous Article
A nonmonotone smoothing Newton algorithm for solving box constrained variational inequalities with a $P_0$ function
JIMO Home
This Issue
Next Article
Convergence property of an interior penalty approach to pricing American option

April 2011, 7(2): 449-465. doi: 10.3934/jimo.2011.7.449

Overbooking with transference option for flights

Yanming Ge ^1, , Ziwen Yin ^2, and Yifan Xu ^3,

1.	School of management, Fudan University, Shanghai, 200433, China
2.	School of management, Fudan University, Shanghai 200433, China
3.	School of Management, Fudan University, Shanghai 200433

Received February 2010 Revised February 2011 Published April 2011

Abstract
Related Papers

In today's competitive market of the civil aviation industry, overbooking has been a common strategy for airlines to deal with uncertainty. However, while raising the overbooking level could recover partial losses caused by cancelation and no-show, this policy would bring more uncertainty into the system. As a solution, a new method of "transference" has recently been implemented by some major airlines in China. This method allows some of the overflowed passengers resulting from overbooking to board on a later flight with certain compensation. When it is properly implemented, airline companies could enjoy reduced uncertainty and improved revenue. In this paper, we build a model to depict this method, design a procedure to determine the optimal transferring quantity among flights of different departure times, analyze the overbooking level of each flight, and show improved revenue under the method of "transference". We also present a numerical example to highlight that our results may coincide with reality.

Keywords: transference, point process intensity control., overbooking, Revenue management.

Mathematics Subject Classification: Primary: 93E20, 90B06; Secondary: 49L2.

Citation: Yanming Ge, Ziwen Yin, Yifan Xu. Overbooking with transference option for flights. Journal of Industrial and Management Optimization, 2011, 7 (2) : 449-465. doi: 10.3934/jimo.2011.7.449

References:

[1]	J. Alstrup, S. Boas, O. B. G. Madsen and R. V. V. Vidal, Booking Policy for Flights with two types of passengers, European Journal of Operational Research, 27 (1986), 274-288. doi: 10.1016/0377-2217(86)90325-5.
[2]	D. Arthur, S. Malone and O. Nir, Optimal overbooking, The UMAP Journal, 23 (2002), 283-300.
[3]	Y. Bassok, R. Anupindi and R. Akella, Single-period multiproduct inventory models with substitution, Operations Research, 47 (1999), 632-642. doi: 10.1287/opre.47.4.632.
[4]	Z. P. Bayindir, N. Erkip and R. Güllü, Assessing the benefits of remanufacturing option under one-way substitution and capacity constraint, Comput Oper Res, 34 (2007), 487-514. doi: 10.1016/j.cor.2005.03.010.
[5]	P. P. Belobaba, Airline Yield Management: An Overview of Seat Inventory Control, Transportation Science, 21 (1987), 63-73. doi: 10.1287/trsc.21.2.63.
[6]	P. P. Belobaba, Application of a Probabilistic Decision Model to Airline Seat Inventory Control, Operations Research, 37 (1989), 183-197.
[7]	P. Brémaud, "Point Processes and Queues, Martingale Dynamics," Springer-Verlag, New York, 1981.
[8]	T. Chatwin, Optimal control of continuous-time terminal-value birth-and-death processes and airline overbooking, Naval Research Logistics, 43 (1996), 159-168. doi: 10.1002/(SICI)1520-6750(199603)43:2<159::AID-NAV1>3.0.CO;2-9.
[9]	R. E. Chatwin, Multi-period airline overbooking with a single fare class, Operations Research, 46 (1998), 805-819. doi: 10.1287/opre.46.6.805.
[10]	R. E. Chatwin, Continuous-time airline overbooking with time dependent fares and refunds, Transportation Science, 33 (1999), 182-191. doi: 10.1287/trsc.33.2.182.
[11]	Y. Feng and G. Gallego, Optimal stopping times for end of season sales and optimal starting times for promotional fares, Management Science, 41 (1995), 1371-1391. doi: 10.1287/mnsc.41.8.1371.
[12]	Y. Feng and B. Xiao, Maximizing revenue of perishable assets with risk analysis, Operations Research, 47 (1999), 337-341. doi: 10.1287/opre.47.2.337.
[13]	Y. Feng and B. Xiao, Optimal policies of yield management with multiple predetermined prices, Operations Research, 48 (2000), 332-343. doi: 10.1287/opre.48.2.332.13373.
[14]	Y. Gerchak, A. Tripathy and K. Wang, Co-procuction models with random functionality yields, IIE Trans, 28 (1996), 391-403. doi: 10.1080/07408179608966286.
[15]	A. Hsu and Y. Bassok, Random yield and random demand in a production system with downward substitution, Operations Research, 47 (1999), 277-290. doi: 10.1287/opre.47.2.277.
[16]	I. Karaesmen and G. van Ryzin, Overbooking with substitutable inventory classes, Operations Research, 52 (2004), 83-104. doi: 10.1287/opre.1030.0079.
[17]	Z. L. Kevin, S. E. Spagniole and M. W. Stefan, Probabilistically optimized airline overbooking strategies, or "Anyone Willing to Take a Later Flight?!", The UMAP Journal, 23 (2002), 317-338.
[18]	L. Kosten, Een mathematisch model voor een reservingsprobleem, Statist Neerlandica, 14 (1960), 85-94. doi: 10.1111/j.1467-9574.1960.tb00893.x.
[19]	Y. Liang, Solution to the continuous time dynamic yield management model, Transportation Science, 33 (1999), 117-123. doi: 10.1287/trsc.33.1.117.
[20]	V. Liberman and U. Yechiali, On the hotel overbooking problem - an inventory system with stochastic cancellations, Management Science, 24 (1978), 1117-1126. doi: 10.1287/mnsc.24.11.1117.
[21]	K. Littlewood, Forecasting and control of passengers, in "12th AGIFORS symposium Proceedings," (1972), 103-105.
[22]	M. Ignaccolo and G. Inturri, A Fuzz approach to overbooking in air transportation, Journal of Air Transportation Worldwide, 5 (2000), 19-38.
[23]	M. P. Schubmehl, W. M. Turner and D. M. Boylan, Models for evaluating airline overbooking, The UMAP Journal, 23 (2002), 301-316.
[24]	M. Rothstein, An airline Overbooking Model, Transportation Science, 5 (1971), 180-192. doi: 10.1287/trsc.5.2.180.
[25]	B. Smith, J. Leimkuhler, R. Darrow and J. Samules, Yield management at american airlines, Interface, 1 (1992), 8-31.
[26]	J. Subramanian, S. Stidham and C. Lautenbacher, Airline yield management with overbooking, cancellation and no-shows, Transportation Science, 33 (1999), 136-146. doi: 10.1287/trsc.33.2.147.
[27]	Y. Suzuki, An empirical analysis of the optimal overbooking policies for US major airlines, Transportation Research Part E: Logistics and Transportation Review, 38 (2002), 135-149. doi: 10.1016/S1366-5545(01)00016-3.
[28]	Y. Suzuki, The net benefit of airline overbooking, Transportation Research Part E: Logistics and Transportation Review, 42 (2006), 1-19. doi: 10.1016/j.tre.2004.09.001.

show all references

References:

[1]	J. Alstrup, S. Boas, O. B. G. Madsen and R. V. V. Vidal, Booking Policy for Flights with two types of passengers, European Journal of Operational Research, 27 (1986), 274-288. doi: 10.1016/0377-2217(86)90325-5.
[2]	D. Arthur, S. Malone and O. Nir, Optimal overbooking, The UMAP Journal, 23 (2002), 283-300.
[3]	Y. Bassok, R. Anupindi and R. Akella, Single-period multiproduct inventory models with substitution, Operations Research, 47 (1999), 632-642. doi: 10.1287/opre.47.4.632.
[4]	Z. P. Bayindir, N. Erkip and R. Güllü, Assessing the benefits of remanufacturing option under one-way substitution and capacity constraint, Comput Oper Res, 34 (2007), 487-514. doi: 10.1016/j.cor.2005.03.010.
[5]	P. P. Belobaba, Airline Yield Management: An Overview of Seat Inventory Control, Transportation Science, 21 (1987), 63-73. doi: 10.1287/trsc.21.2.63.
[6]	P. P. Belobaba, Application of a Probabilistic Decision Model to Airline Seat Inventory Control, Operations Research, 37 (1989), 183-197.
[7]	P. Brémaud, "Point Processes and Queues, Martingale Dynamics," Springer-Verlag, New York, 1981.
[8]	T. Chatwin, Optimal control of continuous-time terminal-value birth-and-death processes and airline overbooking, Naval Research Logistics, 43 (1996), 159-168. doi: 10.1002/(SICI)1520-6750(199603)43:2<159::AID-NAV1>3.0.CO;2-9.
[9]	R. E. Chatwin, Multi-period airline overbooking with a single fare class, Operations Research, 46 (1998), 805-819. doi: 10.1287/opre.46.6.805.
[10]	R. E. Chatwin, Continuous-time airline overbooking with time dependent fares and refunds, Transportation Science, 33 (1999), 182-191. doi: 10.1287/trsc.33.2.182.
[11]	Y. Feng and G. Gallego, Optimal stopping times for end of season sales and optimal starting times for promotional fares, Management Science, 41 (1995), 1371-1391. doi: 10.1287/mnsc.41.8.1371.
[12]	Y. Feng and B. Xiao, Maximizing revenue of perishable assets with risk analysis, Operations Research, 47 (1999), 337-341. doi: 10.1287/opre.47.2.337.
[13]	Y. Feng and B. Xiao, Optimal policies of yield management with multiple predetermined prices, Operations Research, 48 (2000), 332-343. doi: 10.1287/opre.48.2.332.13373.
[14]	Y. Gerchak, A. Tripathy and K. Wang, Co-procuction models with random functionality yields, IIE Trans, 28 (1996), 391-403. doi: 10.1080/07408179608966286.
[15]	A. Hsu and Y. Bassok, Random yield and random demand in a production system with downward substitution, Operations Research, 47 (1999), 277-290. doi: 10.1287/opre.47.2.277.
[16]	I. Karaesmen and G. van Ryzin, Overbooking with substitutable inventory classes, Operations Research, 52 (2004), 83-104. doi: 10.1287/opre.1030.0079.
[17]	Z. L. Kevin, S. E. Spagniole and M. W. Stefan, Probabilistically optimized airline overbooking strategies, or "Anyone Willing to Take a Later Flight?!", The UMAP Journal, 23 (2002), 317-338.
[18]	L. Kosten, Een mathematisch model voor een reservingsprobleem, Statist Neerlandica, 14 (1960), 85-94. doi: 10.1111/j.1467-9574.1960.tb00893.x.
[19]	Y. Liang, Solution to the continuous time dynamic yield management model, Transportation Science, 33 (1999), 117-123. doi: 10.1287/trsc.33.1.117.
[20]	V. Liberman and U. Yechiali, On the hotel overbooking problem - an inventory system with stochastic cancellations, Management Science, 24 (1978), 1117-1126. doi: 10.1287/mnsc.24.11.1117.
[21]	K. Littlewood, Forecasting and control of passengers, in "12th AGIFORS symposium Proceedings," (1972), 103-105.
[22]	M. Ignaccolo and G. Inturri, A Fuzz approach to overbooking in air transportation, Journal of Air Transportation Worldwide, 5 (2000), 19-38.
[23]	M. P. Schubmehl, W. M. Turner and D. M. Boylan, Models for evaluating airline overbooking, The UMAP Journal, 23 (2002), 301-316.
[24]	M. Rothstein, An airline Overbooking Model, Transportation Science, 5 (1971), 180-192. doi: 10.1287/trsc.5.2.180.
[25]	B. Smith, J. Leimkuhler, R. Darrow and J. Samules, Yield management at american airlines, Interface, 1 (1992), 8-31.
[26]	J. Subramanian, S. Stidham and C. Lautenbacher, Airline yield management with overbooking, cancellation and no-shows, Transportation Science, 33 (1999), 136-146. doi: 10.1287/trsc.33.2.147.
[27]	Y. Suzuki, An empirical analysis of the optimal overbooking policies for US major airlines, Transportation Research Part E: Logistics and Transportation Review, 38 (2002), 135-149. doi: 10.1016/S1366-5545(01)00016-3.
[28]	Y. Suzuki, The net benefit of airline overbooking, Transportation Research Part E: Logistics and Transportation Review, 42 (2006), 1-19. doi: 10.1016/j.tre.2004.09.001.

[1]	Sandeep Dulluri, N. R. Srinivasa Raghavan. Revenue management via multi-product available to promise. Journal of Industrial and Management Optimization, 2007, 3 (3) : 457-479. doi: 10.3934/jimo.2007.3.457
[2]	Karel Kadlec, Bohdan Maslowski. Ergodic boundary and point control for linear stochastic PDEs driven by a cylindrical Lévy process. Discrete and Continuous Dynamical Systems - B, 2020, 25 (10) : 4039-4055. doi: 10.3934/dcdsb.2020137
[3]	Hideaki Takagi. Extension of Littlewood's rule to the multi-period static revenue management model with standby customers. Journal of Industrial and Management Optimization, 2021, 17 (4) : 2181-2202. doi: 10.3934/jimo.2020064
[4]	Jian-Xin Guo, Xing-Long Qu. Robust control in green production management. Journal of Industrial and Management Optimization, 2022, 18 (2) : 1115-1132. doi: 10.3934/jimo.2021011
[5]	Volker Rehbock, Iztok Livk. Optimal control of a batch crystallization process. Journal of Industrial and Management Optimization, 2007, 3 (3) : 585-596. doi: 10.3934/jimo.2007.3.585
[6]	Andrew J. Whittle, Suzanne Lenhart, Louis J. Gross. Optimal control for management of an invasive plant species. Mathematical Biosciences & Engineering, 2007, 4 (1) : 101-112. doi: 10.3934/mbe.2007.4.101
[7]	M. B. Short, G. O. Mohler, P. J. Brantingham, G. E. Tita. Gang rivalry dynamics via coupled point process networks. Discrete and Continuous Dynamical Systems - B, 2014, 19 (5) : 1459-1477. doi: 10.3934/dcdsb.2014.19.1459
[8]	Vladimir Turetsky, Valery Y. Glizer. Optimal decision in a Statistical Process Control with cubic loss. Journal of Industrial and Management Optimization, 2022, 18 (4) : 2903-2926. doi: 10.3934/jimo.2021096
[9]	Guirong Jiang, Qishao Lu, Linping Peng. Impulsive Ecological Control Of A Stage-Structured Pest Management System. Mathematical Biosciences & Engineering, 2005, 2 (2) : 329-344. doi: 10.3934/mbe.2005.2.329
[10]	Eungab Kim. On the admission control and demand management in a two-station tandem production system. Journal of Industrial and Management Optimization, 2011, 7 (1) : 1-18. doi: 10.3934/jimo.2011.7.1
[11]	C.E.M. Pearce, J. Piantadosi, P.G. Howlett. On an optimal control policy for stormwater management in two connected dams. Journal of Industrial and Management Optimization, 2007, 3 (2) : 313-320. doi: 10.3934/jimo.2007.3.313
[12]	Linhao Xu, Marya Claire Zdechlik, Melissa C. Smith, Min B. Rayamajhi, Don L. DeAngelis, Bo Zhang. Simulation of post-hurricane impact on invasive species with biological control management. Discrete and Continuous Dynamical Systems, 2020, 40 (6) : 4059-4071. doi: 10.3934/dcds.2020038
[13]	Mourad Azi, Mohand Ouamer Bibi. Optimal control of a dynamical system with intermediate phase constraints and applications in cash management. Numerical Algebra, Control and Optimization, 2022, 12 (2) : 279-291. doi: 10.3934/naco.2021005
[14]	Shaokuan Chen, Shanjian Tang. Semi-linear backward stochastic integral partial differential equations driven by a Brownian motion and a Poisson point process. Mathematical Control and Related Fields, 2015, 5 (3) : 401-434. doi: 10.3934/mcrf.2015.5.401
[15]	Yoon-Sik Cho, Aram Galstyan, P. Jeffrey Brantingham, George Tita. Latent self-exciting point process model for spatial-temporal networks. Discrete and Continuous Dynamical Systems - B, 2014, 19 (5) : 1335-1354. doi: 10.3934/dcdsb.2014.19.1335
[16]	Valery Y. Glizer, Vladimir Turetsky, Emil Bashkansky. Statistical process control optimization with variable sampling interval and nonlinear expected loss. Journal of Industrial and Management Optimization, 2015, 11 (1) : 105-133. doi: 10.3934/jimo.2015.11.105
[17]	Xing Tan, Yilan Gu, Jimmy Xiangji Huang. An ontological account of flow-control components in BPMN process models. Big Data & Information Analytics, 2017, 2 (2) : 177-189. doi: 10.3934/bdia.2017016
[18]	Tan H. Cao, Boris S. Mordukhovich. Optimal control of a perturbed sweeping process via discrete approximations. Discrete and Continuous Dynamical Systems - B, 2016, 21 (10) : 3331-3358. doi: 10.3934/dcdsb.2016100
[19]	Ellina Grigorieva, Evgenii Khailov, Andrei Korobeinikov. Parametrization of the attainable set for a nonlinear control model of a biochemical process. Mathematical Biosciences & Engineering, 2013, 10 (4) : 1067-1094. doi: 10.3934/mbe.2013.10.1067
[20]	Lukáš Adam, Jiří Outrata. On optimal control of a sweeping process coupled with an ordinary differential equation. Discrete and Continuous Dynamical Systems - B, 2014, 19 (9) : 2709-2738. doi: 10.3934/dcdsb.2014.19.2709

2021 Impact Factor: 1.411

Tools

Metrics

Other articles
by authors

on AIMS
Yanming Ge Ziwen Yin Yifan Xu
on Google Scholar
Yanming Ge Ziwen Yin Yifan Xu

[Back to Top]