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Matthias Koenig, Joern Meissner
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| Abstract |
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Consider a single-leg dynamic revenue management problem with fare classes controlled
by capacity in a risk-averse setting. The revenue management strategy aims
at limiting the down-side risk, and in particular, value-at-risk. A value-at-risk optimised
policy offers an advantage when considering applications which do not
allow for a large number of reiterations. They allow for specifying a confidence
level regarding undesired scenarios.
We introduce a computationalmethod for determining policies which optimises
the value-at-risk for a given confidence level. This is achieved by computing dynamic
programming solutions for a set of target revenue values and combining the
solutions in order to attain the requestedmulti-stage risk-averse policy. We reduce
the state space used in the dynamic programming in order to provide a solution
which is feasible and has less computational requirements. Numerical examples
and comparison with other risk-sensitive approaches are discussed. |
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| Keywords |
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Capacity Control, Revenue Management, Risk, Value-at-Risk
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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-04.pdf
(177 kb) |
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| Reference |
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BibTeX,
Plain Text |
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