Revenue Management for Strategic Alliances with Applications to the Airline Industry

163 Pages·2011·4.85 MB·English

Revenue Management for Strategic
Alliances with Applications to the
Airline Industry
VonderMercatorSchoolofManagement,FakultätfürBetriebswirtschaftslehreder
UniversitätDuisburg-Essen
zurErlangungdesakademischenGrades
einesDoktorsderWirtschaftswissenschaft(Dr. rer. oec.)
genehmigteDissertation
von
Michaela Graf
aus
Tübingen.
Referent: Prof. Dr. AlfKimms
Korreferent: Prof. Dr. PeterChamoni
TagdermündlichenPrüfung: 02.02.2011
Preface
ThisdissertationwaswrittenduringmytimeasresearchassistantattheChairofLogisticsandOpera-
tionsResearchattheMercatorSchoolofManagement, UniversityofDuisburg-Essen. Iamgratefulto
manypeopleandinstitutionsthatsupportedmyproject.
FirstofallIwanttothankmysupervisorProf. Dr. AlfKimmsfordrawingmyattentiontothefieldof
revenuemanagementandgivingmethechancetowritethisdissertationathischair. Itrulyvaluedhis
supportandtheinspiringdiscussionsduringtheentireprocess. Iwouldalsoliketothankmysecond
assessorProf. Dr. PeterChamoniforhisinterestinthesubject.
MyresearchprojectwasfundedbytheDeutscheForschungsgemeinschaft(DFG)-GrantKI1272/2-1. I
deeplyappreciatethesupport.
IamindebtedtoallthepeopleattheUniversitythatmadethelastfouryearsbothrewardingandfun.
Ihadthepleasuretobepartofagreatresearchteam. InparticularIwouldliketothankmycolleagues,
namelySarahBretschneider,DemetÇetiner,Klaus-ChristianMaassen,Dr. MichaelMüller-Bungart,Dr.
JuliaSchaaff, StefanieKockerols, MarcKschonsak, Çag˘das¸ Özgür, andNicoleJaschinskiforcreatinga
verypositiveatmospherethatIenjoyedverymuchworkinginandtheirvaluablesupportinresearch,
lecturing, programming, and organizational work. Besides excellent collaboration at the University, I
will always remember our non-academic fun times going to concerts, doings sports, exploring cities
by photography walks, and all the great times that we had. Furthermore, I thank my colleagues from
otherdivisionsoftheUniversityofDuisburg-Essen.EspeciallyStefanKrebs,MarkusLinden,andJudith
SchneiderforwelcomingmeinDuisburg.
Thankstoallmyfriendsforallthesupportandencouragement.IspeciallythankLiseLubbersen,Nicole
Noack,andSabinePfisterfortakingmymindoffofthingswhenIneededit.
I express my gratitude to Elisabeth and Dr. Hubert Saat and the families of their daughters, Kathrin
GerwensandBarbaraWohlgemuth,forlettingmepartoftheirfamily. Thankstoourwonderfulnieces
Helena,Frieda,andTheresafortheirplayfuljoyandthespectaculartimethatweshare.
IparticularlythankmysisterStephanieLangbein,mybrothersJohannesMauzandAlexanderRieder,
andmygrandparentsMajaGrafaswellasBärbelandWalterHeitzlerfortheircontinuingencourage-
ment. Thankyoufortakingsomuchinterestinmylife.
IamdeeplyindebtedtomyparentsGabrieleMauzandHanns-MichaelGrafwithhiswifeDr. Annette
Winkler, andmyboyfriendDr. JanSaatfortheireverlastingsupportandlove. Thesecuritytheygive
meisirreplaceableandIamverygratefulfortheirconspiringadvicesandunbreakabletrust. Thisbook
isdedicatedtothemwithallmyheart.
Burladingen/Überlingen,October2010 MichaelaGraf

Contents
ListofFigures vii
ListofTables ix
1 Introduction 1
2 ConceptualFoundationofRevenueManagement 3
2.1 HistoricalDevelopmentofRevenueManagement . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 TheoreticalBasicsofRevenueManagement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.1 CharacteristicsofRevenueManagementProblems . . . . . . . . . . . . . . . . . . 6
2.2.1.1 RequirementofExternalFactorIntegration . . . . . . . . . . . . . . . . . 6
2.2.1.2 RestrictedOperationalFlexibilityofCapacity . . . . . . . . . . . . . . . . 7
2.2.1.3 HeterogeneousDemandBehavior . . . . . . . . . . . . . . . . . . . . . . . 8
2.2.1.4 StandardizedProducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2.2 RevenueManagementInstruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2.2.1 Segment-OrientatedPriceDifferentiation. . . . . . . . . . . . . . . . . . . 11
2.2.2.2 Overbooking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.2.3 CapacityControl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3 RemarksonStrategicAlliances 23
3.1 DefiningStrategicAlliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2 ApplicationAreasofRevenueManagementinCombinationwithStrategicAlliances . . . 25
3.2.1 PassengerAirlineIndustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2.2 AirCargoSector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2.3 PassengerRailroadSector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2.4 FreightSector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2.5 TouristSectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2.6 ManufacturingSector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.2.7 MiscellaneousSectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
iii
CONTENTS
4 CapacityControlwithRealOptions 31
4.1 RemarksonRealOptionTheory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2 DeterminationofBookingLimits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.2.1 InteractionBetweenAirlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.2.2 DeterministicModelstoCalculateBookingLimits . . . . . . . . . . . . . . . . . . . 34
4.2.3 EMSRHeuristicstoCalculateBookingLimits . . . . . . . . . . . . . . . . . . . . . 38
4.2.4 SimulationofBookingProcesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3 ComputationalStudyfortheOption-BasedProcedures . . . . . . . . . . . . . . . . . . . . 45
4.3.1 TestBedforOption-BasedProceduresAnalysis . . . . . . . . . . . . . . . . . . . . 45
4.3.2 EvaluationoftheOption-BasedProcedures . . . . . . . . . . . . . . . . . . . . . . . 47
5 BookingLimitImprovement 53
5.1 Simulation-BasedOptimization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.2 BookingLimitImprovementbySimultaneousPerturbationStochasticApproximation . . 54
5.3 ComputationalStudyforOption-BasedProcedurewithSPSA . . . . . . . . . . . . . . . . 57
5.3.1 TestBedforOBP&SPSAProcedureAnalysis . . . . . . . . . . . . . . . . . . . . . . 57
5.3.2 EvaluationoftheOBP&SPSAProcedure . . . . . . . . . . . . . . . . . . . . . . . . 57
6 HeuristicCalculationofBookingLimits 63
6.1 DeterminationofBookingLimitswithGeneticAlgorithm . . . . . . . . . . . . . . . . . . . 63
6.2 ComputationalStudyfortheGeneticAlgorithms. . . . . . . . . . . . . . . . . . . . . . . . 69
6.2.1 TestBedforGeneticAlgorithmAnalysis . . . . . . . . . . . . . . . . . . . . . . . . 69
6.2.2 EvaluationoftheGeneticAlgorithms . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7 CapacityControlwithRealOptionsandTransferPriceOptimization 77
7.1 TransferPricesinStrategicAlliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.2 DeterminationofOptimalTransferPrices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.2.1 InteractionBefore,During,andAftertheBookingProcess . . . . . . . . . . . . . . 81
7.2.2 NegotiationProcess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.3 ComputationalStudyfortheOption-BasedProcedureswithTransferPriceOptimization 90
7.3.1 Test Bed for the Analysis of Option-Based Procedures with Transfer Price Opti-
mization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.3.2 EvaluationoftheOption-BasedProcedureswithTransferPriceOptimization . . . 94
7.3.2.1 ComparisonofProcedures(RevenueInstances1–4) . . . . . . . . . . . . 95
7.3.2.2 ComparisonofProcedures(RevenueInstances1–8) . . . . . . . . . . . . 103
7.3.2.3 Comparison of Procedures to Genetic Algorithm Procedures (Revenue
Instances1–8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
8 ConclusionsandFutureResearch 117
iv
CONTENTS
A Appendix: ComputationalStudies 121
A.1 ComputationalStudy: DemandInputData . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
A.2 ComputationalStudy: ComputationalStudyOBP&SPSA+Prices. . . . . . . . . . . . . . . 125
Bibliography 135
v

List of Figures
2.1 PartitionedBookingLimitsandProtectionLevels(compareLeeandHersh,1993) . . . . . 16
2.2 NestedBookingLimitsandProtectionLevels . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 InteractionbetweenOCandTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 AnIllustrationoftheTwo-AirlineCase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.3 TheSimulationProcessoftheOperatingCarrier . . . . . . . . . . . . . . . . . . . . . . . . 43
4.4 TheSimulationProcessoftheTicketingCarrier . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.1 GenotypeGeneticAlgorithm1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.2 GenotypeGeneticAlgorithm2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.3 ExampleTwo-PointCrossoverGeneticAlgorithm1 . . . . . . . . . . . . . . . . . . . . . . 68
7.1 InteractionbetweenOCandTCbefore,during,andafterthebookingprocess . . . . . . . 82
7.2 CaseDifferentiationwithFourBookingClasses. . . . . . . . . . . . . . . . . . . . . . . . . 85
7.3 NegotiationProcessoftheOperatingCarrierandtheTicketingCarrier . . . . . . . . . . . 87
7.4 Option-Based+PricesProcedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.5 OBP&SPSA+PricesProcedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.6 OBP&SPSA+Prices(1-4)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=120,DemandScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
7.7 OBP&SPSA+Prices(1-4)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=120,RevenueScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
7.8 OBP&SPSA+Prices(1-8)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=120,DemandScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.9 OBP&SPSA+Prices(1-8)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=120,RevenueScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
A.1 OBP&SPSA+Prices(1-4)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=100,DemandScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
A.2 OBP&SPSA+Prices(1-4)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=150,DemandScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
A.3 OBP&SPSA+Prices(1-4)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=100,RevenueScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
vii
LISTOFFIGURES
A.4 OBP&SPSA+Prices(1-4)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=150,RevenueScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
A.5 OBP&SPSA+Prices(1-8)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=100,DemandScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
A.6 OBP&SPSA+Prices(1-8)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=150,DemandScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
A.7 OBP&SPSA+Prices(1-8)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=100,RevenueScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
A.8 OBP&SPSA+Prices(1-8)–PerformanceofProceduresRelativetoExPostOptimalSolu-
tions,C=150,RevenueScenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
viii