Fair Revenue Sharing Mechanisms for Strategic Passenger Airline Alliances

180 Pages·2013·2.32 MB·English

by  Demet Çetiner (auth.)

Lecture Notes in Economics and Mathematical Systems 668
Demet Çetiner
Fair Revenue
Sharing
Mechanisms
for Strategic
Passenger Airline
Alliances
Lecture Notes in Economics
and Mathematical Systems 668
FoundingEditors:
M.Beckmann
H.P.Ku¨nzi
ManagingEditors:
Prof.Dr.G.Fandel
FachbereichWirtschaftswissenschaften
Fernuniversita¨tHagen
Hagen,Germany
Prof.Dr.W.Trockel
MuratSertelInstituteforAdvancedEconomicResearch
IstanbulBilgiUniversity
Istanbul,Turkey
Institutfu¨rMathematischeWirtschaftsforschung(IMW)
Universita¨tBielefeld
Bielefeld,Germany
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H.Dawid,D.Dimitrov,A.Gerber,C-J.Haake,C.Hofmann,T.Pfeiffer,
R.Slowin´ski,W.H.M.Zijm
Forfurthervolumes:
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Demet C¸etiner
Fair Revenue Sharing
Mechanisms for Strategic
Passenger Airline Alliances
123
DemetC¸etiner
Du¨sseldorf
Germany
Zugl.:Duisburg-Essen,Univ.,Diss.,2012
ISSN0075-8442
ISBN978-3-642-35821-0 ISBN978-3-642-35822-7(eBook)
DOI10.1007/978-3-642-35822-7
SpringerHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2013935986
(cid:2)c Springer-VerlagBerlinHeidelberg2013
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Preface
This work has been carried out during my employment as a research assistant at
the University of Duisburg-Essen, Chair of Logistics and Operations Research. It
was funded by the Deutsche Forschungsgemeinschaft (DFG) under grant no. KI
1272/2-1.
Airlines realize variousbenefits throughforming strategic alliances. They earn
revenuesthroughsellingticketsfortheflights,whereseveralairlinesareinvolved.
This work proposes mechanisms for the fair allocation of the revenue among the
alliancepartners.Solutionsbasedoncooperativegametheoryaredeveloped,which
arethenusedtodevelopandevaluateotherheuristicmethods.
Thecompletionofthisstudywouldnothavebeenpossiblewithoutthecontribu-
tion andsupportof manypeople.First of all, I would like to thankmy supervisor
Prof. Dr. Alf Kimms for introducing me the idea of my research and providing
me the opportunity to work on his chair. I am greatly indebted to his guidance,
valuablediscussionsandencouragementthroughoutmydoctoralstudy.Ialsothank
toProf.Dr.PeterChamoniforreviewingmywork.
ItwasagreatpleasureformetoworkwithmycolleaguesSarahBretschneider,
MichaelaGraf,WaldemarGrauberger,IgorKozeletskyi,Klaus-ChristianMaassen,
Christina van Megen, Christoph Reiners and Julia Schaaff. I would like to thank
themforprovidingmevaluablesupportinmyresearchandteachingactivities,for
ourinspiringdiscussionsaswellasforthenon-workrelatedtimeweshared,which
made these four years an enjoyable and rewarding experience for me. I am also
indebtedtomycolleagueJudithChristianeSchneiderformtheuniversityforhaving
madehersupportavailableinanumberofways.
I would also like to thank C¸ag˘das¸ O¨zgu¨r, Christian Ka¨stner and Mohammad
Alberaqdar for providing me technical support, Stefanie Kockerols and Vera
Riesenweber for their help in literature research as well as Nicole Jaschinski for
herconstantsupportintheorganizationalissues.
IamgratefultomyfriendDeryaUysalforalwayslisteningtomeandcheering
me on when I needed.Special thanksgo to Emine Gu¨ner and my otherfriendsin
Dortmundforthewonderfulorganizationsandveryenjoyabletimes,whichkeptme
motivated through the entire process. Moreover, I would like to thank everybody
v
vi Preface
supportingmedespitethelong-distancebetweenusandexpressmyapologynotto
mentionpersonallyonebyone.
Finally, I would like to expressmy gratitudeto my family for their continuous
encouragement. Their unwavering support and love gave me the strength to get
throughthedifficultsituations.
Du¨sseldorf DemetC¸etiner
Contents
1 Introduction .................................................................. 1
References..................................................................... 2
2 SelectedTopicsinRevenueManagement ................................. 3
2.1 OriginsofRevenueManagement...................................... 3
2.2 RevenueManagementCoreIdeas..................................... 5
2.3 CharacteristicsofRevenueManagementProblems .................. 7
2.3.1 IntegrationoftheExternalFactors............................ 7
2.3.2 HeterogeneousCustomerBehavior ........................... 8
2.3.3 RestrictedOperationalFlexibilityofCapacity ............... 8
2.3.4 StandardizedProducts ......................................... 9
2.4 Capacity ControlApproachesforAirline Revenue
ManagementProblems................................................. 10
2.4.1 Single-LegCapacityControl .................................. 10
2.4.2 NetworkCapacityControl..................................... 17
2.4.3 Overbooking.................................................... 26
References..................................................................... 27
3 AReviewofStrategicPassengerAirlineAlliances....................... 31
3.1 StrategicAlliances...................................................... 31
3.2 PassengerAirlineIndustry............................................. 32
3.2.1 MotivationsandBackground.................................. 32
3.2.2 OperationsofPassengerAirlineAlliances.................... 34
3.2.3 LiteratureReview .............................................. 34
3.3 OtherIndustries......................................................... 39
References..................................................................... 40
4 SelectedTopicsinCooperativeGameTheory ............................ 43
4.1 DefiningGameTheory................................................. 43
4.2 CooperativeGameTheory............................................. 45
4.3 RepresentationofaCooperativeGame................................ 46
4.4 PropertiesofCooperativeGames...................................... 47
vii
viii Contents
4.5 PropertiesofPayoffAllocations....................................... 48
4.6 GameTheoreticalSolutionConcepts.................................. 49
4.6.1 TheCore........................................................ 49
4.6.2 ExistenceoftheCore .......................................... 52
4.6.3 The(cid:2)-Core...................................................... 54
4.6.4 TheLeast-Core................................................. 55
4.6.5 TheNucleolus.................................................. 56
4.6.6 TheKernel...................................................... 61
4.6.7 TheOwenSet .................................................. 62
4.6.8 ShapleyValue .................................................. 64
4.7 ApplicationsofCooperativeGameTheory ........................... 66
References..................................................................... 69
5 AirlineAllianceRevenueManagementGame............................ 73
5.1 ALinearProgrammingFormulation .................................. 73
5.2 PropertiesoftheAirlineAllianceRevenueManagementGame..... 76
5.3 TheCoreoftheAirlineAllianceRevenueManagementGame...... 78
5.4 The Owen Set of the Airline Alliance Revenue
ManagementGame..................................................... 81
References..................................................................... 82
6 ApproximateNucleolus-BasedRevenueShares
forAirlineAlliances ......................................................... 83
6.1 Motivation .............................................................. 83
6.2 ComputationoftheNucleolus......................................... 84
6.2.1 AReviewofAlgorithms....................................... 84
6.2.2 LexicographicMinimization .................................. 85
6.2.3 ANumericalExample ......................................... 87
6.3 The Nucleolus of the Airline Alliance Revenue
ManagementGame..................................................... 90
6.3.1 LexicographicMinimizationwithaConstraint
GenerationProcedure ......................................... 90
6.3.2 ANumericalExample ......................................... 94
6.4 ARevenueProrationScheme.......................................... 97
6.5 ComputationalStudy................................................... 98
6.5.1 MediumSizedNetworks....................................... 98
6.5.2 LargeScaleNetworks.......................................... 101
6.6 TheUseoftheNucleolus-BasedAllocationsasaBenchmark....... 102
6.7 ASmallScaleSimulationStudy....................................... 105
References..................................................................... 108
7 SelfishRevenueSharingMechanismsforAirlineAlliances............. 111
7.1 SelfishRevenueSharinginAirlineAlliances ........................ 111
7.2 AllianceRevenueManagementasCommon ......................... 112
7.2.1 SelfishSeatAllocationDecisions ............................. 112
7.2.2 SimulationoftheBookingProcess............................ 114
Contents ix
7.3 SelfishRevenueSharingMechanisms................................. 117
7.3.1 TraveledDistanceHeuristic ................................... 117
7.3.2 LocalValueHeuristic.......................................... 118
7.3.3 Leg-BasedDemandHeuristic ................................. 119
7.4 FairnessEvaluation..................................................... 120
7.5 ComputationalStudy................................................... 123
7.5.1 GenerationoftheInstances.................................... 123
7.5.2 FairnessEvaluationBasedontheNucleolus ................. 124
7.5.3 FairnessEvaluationBasedontheOwenSet.................. 129
References..................................................................... 131
8 ARevenueSharingMechanismBasedontheTransferof
DualPrices.................................................................... 133
8.1 TheMechanismonFlightsOperatedbyTwoAirlines ............... 133
8.1.1 AnIllustrationbyMeansofanExample...................... 133
8.1.2 GeneralProcessforFlightsInvolvingTwoAirlines.......... 140
8.2 TheMechanismonFlightsOperatedbyThreeAirlines.............. 144
8.2.1 AnIllustrationbyMeansofanExample:Case1............. 144
8.2.2 AnIllustrationbyMeansofanExample:Case2............. 147
8.2.3 GeneralProcessforFlightsInvolvingThree
Airlines:Case1 ................................................ 149
8.2.4 GeneralProcessforFlightsInvolvingThree
Airlines:Case2 ................................................ 152
8.3 ComputationalStudy................................................... 154
Reference...................................................................... 157
9 ConclusionsandFutureResearch.......................................... 159
A Appendix:ComputationalStudies......................................... 163
A.1 Approximate Nucleolus-Based Revenue Shares
forPassengerAirlineAlliances........................................ 163
A.2 SelfishRevenueSharingMechanismsforAirlineAlliances......... 165
A.3 ARevenueSharingMechanismBasedontheTransfer
ofDualPrices........................................................... 167