Stochastic comparisons in revenue management under a discrete choice model of consumer behavior

Hideo Miki, De Bi Cao, Yasushi Masuda

Research output: Contribution to journalArticle

Abstract

This study examines the monotonicity properties of expected revenue in a revenue management problem with respect to the consumers' choice behavior and the market size. The consumer behavior is described by a general discrete choice model. The firm decides which subset of fare products to offer at each time period. An example shows that the usual stochastic order relation in consumers' preference over the set of fare products is not sufficient for our naive intuition regarding the monotonicity to hold true. We provide sufficient conditions under which our intuition is valid. These conditions identify desirable changes in consumer behavior for the firm.

Original languageEnglish
Pages (from-to)207-219
Number of pages13
JournalJournal of the Operations Research Society of Japan
Volume53
Issue number3
DOIs
Publication statusPublished - 2010 Sep

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Keywords

  • Applied probability
  • Markov decision process
  • Revenue management
  • Stochastic comparison

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

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