Review of revenue management methods with dependent demands

Owing to the global proliferation of simplified, lightly restricted airfares since the year 2000, the older Revenue Management (RM) technologies that are based on unadjusted Expected Marginal Seat Revenue and independent demands have become less relevant. Airlines around the world are looking for new tools to manage the more realistic situation of dependent demand RM. In fact, new RM tools designed for dependent demands are showing 5+ per cent revenue improvements, which is very significant. As of Spring 2008, surveys results showed slow adoption of these new RM technologies (only 22 per cent of carriers had implemented ‘Low Fare’ or lightly restricted pricing solution modules). Although initial versions had limitations, both the science and tools for dependent demand RM have matured over the past 5 years. The latest versions of dependent demand RM systems should outperform rule-based heuristics that many carriers moved to after deciding that their traditional RM systems were not working as needed in their new lightly restricted fare environment. This article is designed to promote awareness among carriers and researchers that these newer RM technologies for managing dependent demands are now available and perform effectively.

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