revenue management

Tricks from the Trade for Large-Scale Markdown Pricing: Heuristic Cut Generation for Lagrangian Decomposition

  • Robert Streeck
  • Andreas Schmitt
  • Torsten Gellert
  • Asya Dipkaya
  • Vladimir Fux
  • Tim Januschowski
  • Timo Berthold
    • Categories (Mixed) Integer Linear Programming, Applications - OR and Management Sciences Tags , , , ,

    In automated decision making processes in the online fashion industry, the ‘predict-then-optimize’ paradigm is frequently applied, particularly for markdown pricing strategies. This typically involves a mixed-integer optimization step, which is crucial for maximizing profit and merchandise volume. In practice, the size and complexity of the optimization problem is prohibitive for using off-the-shelf solvers for mixed … Read more

    An Exact Method for Assortment Optimization under the Nested Logit Model

  • Laurent Alfandari
  • Ivana Ljubić
  • Alborz Hassanzadeh
    • Categories Applications - OR and Management Sciences Tags , , , ,

    We study the problem of finding an optimal assortment of products maximizing the expected revenue, in which customer preferences are modeled using a Nested Logit choice model. This problem is known to be polynomially solvable in a specific case and NP-hard otherwise, with only approximation algorithms existing in the literature. For the NP-hard cases, we … Read more

    Joint Inventory and Revenue Management with Removal Decisions

  • Alvaro Maggiar
  • Ali Sadighian
    • Categories Applications - OR and Management Sciences, Dynamic Programming, Supply Chain Management Tags , , , , , ,

    We study the problem of a retailer that maximizes profit through joint replenishment, pricing and removal decisions. This problem is motivated by the observation that retailers usually retain rights to remove inventory from their network either by returning it to the suppliers or through liquidation in the face of random demand and capacity constraints. We … Read more

    Risk-based Loan Pricing: Portfolio Optimization Approach With Marginal Risk Contribution

  • So Yeon Chun
  • Miguel A. Lejeune
    • Categories (Mixed) Integer Nonlinear Programming, Finance and Economics, Stochastic Programming Tags , , , , , , ,

    We consider a lender (bank) who determines the optimal loan price (interest rates) to offer to prospective borrowers under uncertain risk and borrowers’ response. A borrower may or may not accept the loan at the price offered, and in the presence of default risk, both the principal loaned and the interest income become uncertain. We … Read more

    Robust Timing of Markdowns

  • Daniela Caro
  • Aurelie Thiele
  • Michael Dziecichowicz
    • Categories Robust Optimization, Yield Management Tags , , ,

    We propose an approach to the timing of markdowns over a finite time horizon that does not require the precise knowledge of the underlying probabilities, instead relying on range forecasts for the arrival rates of the demand processes, and that captures the degree of the manager’s risk aversion through intuitive budget-of-uncertainty functions. These budget functions … Read more

    Passenger Name Record Data Mining Based Cancellation Forecasting for Revenue Management

  • Dolores Romero Morales
  • Jingbo Wang
    • Categories Data-Mining, Yield Management Tags , , , ,

    Revenue management (RM) enhances the revenues of a company by means of demand-management decisions. An RM system must take into account the possibility that a booking may be canceled, or that a booked customer may fail to show up at the time of service (no-show). We review the Passenger Name Record data mining based cancellation … Read more

    Maximum Utility Product Pricing Models and Algorithms Based on Reservation Prices

  • Tor G.J. Myklebust
  • Romy Shioda
  • Levent Tunçel
    • Categories Applications - OR and Management Sciences Tags , ,

    We consider a revenue management model for pricing a product line with several customer segments under the assumption that customers’ product choices are determined entirely by their reservation prices. We highlight key mathematical properties of the maximum utility model and formulate it as a mixed-integer programming problem, design heuristics and valid cuts. We further present … Read more

    Single-Product Pricing via Robust Optimization

  • Aurelie Thiele
    • Categories Robust Optimization, Yield Management Tags , ,

    We present a robust optimization approach to the problem of pricing a capacitated product over a finite time horizon in the presence of demand uncertainty. This technique does not require the knowledge of the underlying probability distributions, which in practice are difficult to estimate accurately, and instead models random variables as uncertain parameters belonging to … Read more

    Re-Solving Stochastic Programming Models for Airline Revenue Management

  • Lijian Chen
  • Tito Homem-de-Mello
    • Categories Applications - OR and Management Sciences, Stochastic Programming Tags , ,

    We study some mathematical programming formulations for the origin-destination model in airline revenue management. In particular, we focus on the traditional probabilistic model proposed in the literature. The approach we study consists of solving a sequence of two-stage stochastic programs with simple recourse, which can be viewed as an approximation to a multi- stage stochastic … Read more

    Maximising Revenue in the Airline Industry Under One-Way Pricing

  • Miguel F. Anjos
  • Russell C H Cheng
  • Christine S M Currie
    • Categories Airline Optimization, Applications - OR and Management Sciences, Yield Management Tags , , ,

    This paper describes a methodology that has been implemented in a major British airline to find the optimal price to charge for airline tickets under one-way pricing. An analytical model has been developed to describe the buying behaviour of customers for flights over the selling period. Using this model and a standard analytical method for … Read more