Airline Revenue Management and e-Markets

Tuesday, December 5, 2000 - 9:00am - 10:00am
Keller 3-180
Garrett van Ryzin (Columbia University)
Revenue (or yield) management uses applied mathematical methods to intelligently control the availability of price discounts. While the practice in airlines predates the internet by several decades, it shares some common features with dynamic pricing in e-markets. Moreover, airline tickets are among the highest volume consumer products sold through new e-commerce pricing mechanisms. Thus, a convergence of these two developments appears to be well underway. In this talk, we discuss the traditional revenue management problem and survey the mathematical models and algorithms that have been developed in this area. We then examine the impact of e-market innovations such as guaranteed purchase contracts, ticket auctions, etc. on the practice of revenue management. While some have suggested that auctions and similar innovations will completely replace traditional price mechanisms, a melding of new and old looks more likely. We discuss the research challenges that arise from this integration.