Model of Dynamic Pricing for Two Parallels Flights with Multiple Fare Classes Based on Passenger Choice Behavior
Abstract: Airline revenue
management (ARM) is one of emerging
topics in transportation logistics areas. This paper discusses a problem in ARM
which is dynamic pricing for two parallel flights owned by the same airline. We
extended the existing model on Joint Pricing Model for Parallel Flights under
passenger choice behavior in the literature. We generalized the model to consider
multiple full-fare class instead of only single full-fare class. Consequently,
we have to define the seat allocation for each fare class beforehand. We have combined the joint
pricing model and the model of nested Expected Marginal Seat Revenue (EMSR)
model. To solve this hybrid model, we have developed a dynamic programming-based algorithm. We also have conducted
numerical experiments to show the behavior of our model. Our experiment results
have showed that the expected revenue of both flights significantly induced by
the proportion of the time flexible passengers and the number of allocated seat in each full-fare class. As managerial
insights, our model has proved that there is a closed relationship between
demand management, which is represented by the price of each fare class, and
total expected revenue considering the passenger choice behavior.
Keywords: Airline revenue
management, parallel flights, dynamic pricing, passanger choice behavior, seat
allocation
Author: Ahmad Rusdiansyah,
Dira Mariana, Hilman Pradana, Naning A. Wessiani
Journal Code: jptindustrigg100006
