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Matthias Koenig, Joern Meissner
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| Abstract |
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Consider a risk-averse decision maker in the setting of a single-leg dynamic revenue
management problem with revenue controlled by limiting capacity for a fixed
set of prices. Instead of focussing on maximizing the expected revenue, the decision
maker has the main objective of minimizing the risk of failing to achieve a
given target revenue.
Interpreting the revenuemanagement problemin the framework of finite Markov
decision processes, we augment the state space of the risk-neutral problem definition
and change the objective function to the probability of failing a certain specified
target revenue. This enables us to obtain a dynamic programming solution
which generates the policy minimizing the risk of not attaining this target revenue.
We compare this solution with recently proposed risk-sensitive policies in a
numerical study and discuss advantages and limitations. |
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| Keywords |
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Capacity Control, Revenue Management, Multi-Period, Risk, Target Level Criterion
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| Status |
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Working Paper |
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| Download |
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www.meiss.com/download/RM-Koenig-Meissner-03.pdf
(346 kb) |
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| Reference |
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BibTeX,
Plain Text |
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