2006 | OriginalPaper | Chapter
An Application of Markov Decision Processes to the Seat Inventory Control Problem
Authors : Christiane Barz, Karl-Heinz Waldmann
Published in: Perspectives on Operations Research
Publisher: DUV
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Airlines typically divide a pool of identical seats into several booking classes that represent e.g. different discount levels with differentiated sale conditions and restrictions. Assuming perfect market segmentation, mixing discount and higher-fare passengers in the same aircraft compartment offers the airline the potential of gaining revenue from seats that would otherwise fly empty. If too many seats are sold at a discount price, however, the airline company would loose full-fare passengers. If too many seats are protected for higher-fare demand, the flight would depart with vacant seats. Seat inventory control deals with the optimal allocation of capacity to these different classes of demand, forming a substantial part of a revenue management system.