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For teaching purposes, I am looking for some nice examples of revenue management problems which are tackled with optimization techniques, ideally linear programming (including MIPs).

For example, this article on Medium is very good in my opinion : it is concise but with enough details, numerical simulations are reproducible, and the problem is solved with linear programming. Even better, the author has showed the impact of using an optimization model vs a first-come-first-served policy. It is (partially?) based on the following reference:

Cross, R.B. (1997). Revenue management: hard-core tactics for market domination. New York: Broadway Books, p. 276.

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For RM using optimization you'd find academic references on:

  1. Newsvendor model - optimizing purchase often with stochastic 2 stage demand and may include penalty for underselling & storage costs.\
  2. Optimal bidding strategy - determining the best price with winning probability P% against a competitor with uniform pricing distribution between $[l,u]$ where the bid will go to the lower bidder\
  3. Airlines revenue models - optimize oversale of tickets per segment in a market with binomial distribution of no-shows so that penalty for overbooking is kept at minimum. Gurobi has a solved example in their Examples site.

References:
Below are some from Gurobi & Lindo/Lingo Tutorials (never understood why Lingo not that used in the industry, may be benchmarked performance of the solver LindoGlobal isn't great even though GAMS uses it or it's Python support that isn't easy to use. Also google search will lead to more academic papers & examples. But above the examples from Gurobi/Lindo may cover most of the examples
For the pricing/bidding one I had found this example in a Duke university graduate class long time back & had downloaded the free example. But not finding it now. So found a homework example, very similar. It's example of unconstrained optimization but also belongs to bidding/auction/Nash equilibrium domain.

Airlines yield management/ Overbooking / Revenue Management
Newsvendor/Newsboy model
Gurobi Additional models (capacity allocation, demand forecast)
Pricing

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  • $\begingroup$ Thanks for the references. Could you please add the links to the refs you mention? $\endgroup$
    – Kuifje
    May 19 at 8:20
  • $\begingroup$ @Kuifje updated. $\endgroup$
    – Sutanu Majumdar
    May 19 at 14:26

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