Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - Value-At-Risk Optimal Policies for Revenue Management Problems
AU - Koenig, M
AU - Meissner, J
PY - 2010
Y1 - 2010
N2 - 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 state the underlying problem as a Markov decision process and provide a computational method for computing policies, which optimise 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 requested multi-stage risk-averse policy. Numerical examples and comparison with other risk-sensitive approaches are discussed.
AB - 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 state the underlying problem as a Markov decision process and provide a computational method for computing policies, which optimise 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 requested multi-stage risk-averse policy. Numerical examples and comparison with other risk-sensitive approaches are discussed.
KW - capacity control
KW - revenue management
KW - risk
KW - value-at-risk
M3 - Working paper
T3 - Management Science Working Paper Series
BT - Value-At-Risk Optimal Policies for Revenue Management Problems
PB - The Department of Management Science
CY - Lancaster University
ER -