Joint Dynamic Pricing Model for Two Parallel Flights Considering Overbooking, Cancellations, and No-Show Customers

Abstract

In this research, we discuss a problem in Airline Revenue Management (ARM), which is dynamic pricing model for two parallel flights owned by the same airline. We extended the existing model on Joint Pricing Model for Parallel Flights in the literature to consider overbooking, cancellations, and no-show customers. To solve the model, we develop a dynamic programming to optimize ticket fares of both flights simultaneously and dynamically over the selling horizon . The objective is to maximize the total expected revenue of both flights. In our experiments, we also determine the overbooking limit of both flights to anticipate the occurrence of cancellations and no-shows. We have conducted some numerical experiments to show the behavior of our proposed model.