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Exogenous Capacity Changes in Airline Revenue Management: Quantifying the Value of Information

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Abstract

In airline revenue management, capacity is usually assumed to be fixed. However, capacity changes are common in practice. This contribution quantifies the value of information when systematically considering possible capacity changes in revenue optimization. It solves a stochastic model that anticipates capacity changes, given different levels of information. A computational study compares solution approaches with respect to the resulting revenue, seat load factor, and denied boarding.