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The Role of Robust Optimization in Single-Leg Airline Revenue Management

. lker Birbil, J. B. G. Frenk, Joaquim A. S. Gromicho, Shuzhong Zhang

Faculty of Engineering and Natural Sciences, Sabanc University, 34956 Istanbul, Turkey
Erasmus University Rotterdam, Postbus 1738, 3000 DR Rotterdam, The Netherlands
Vrije Universiteit, FEWEB-Econometrie, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands, and ORTEC, Postbus 490, 2800 AL Gouda, The Netherlands
Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, Hong Kong
sibirbil{at}sabanciuniv.edu
frenk{at}few.eur.nl
jgromicho{at}feweb.vu.nl
zhang{at}se.cuhk.edu.hk

In this paper, we introduce robust versions of the classical static and dynamic single-leg seat allocation models. These robust models take into account the inaccurate estimates of the underlying probability distributions. As observed by simulation experiments, it turns out that for these robust versions the variability compared to their classical counterparts is considerably reduced with a negligible decrease in average revenue.

Key Words: airline revenue management; single-leg problems; static models; dynamic models; robust optimization
History: Received: May 27, 2007;