Risk-sensitive capacity control in revenue management |
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Authors: | C Barz K -H Waldmann |
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Institution: | 1.Institut für Wirtschaftstheorie und Operations Research,Universit?t Karlsruhe,Karlsruhe,Germany |
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Abstract: | Both the static and the dynamic single-leg revenue management problem are studied from the perspective of a risk-averse decision
maker. Structural results well-known from the risk-neutral case are extended to the risk-averse case on the basis of an exponential
utility function. In particular, using the closure properties of log-convex functions, it is shown that an optimal booking
policy can be characterized by protection levels, depending on the actual booking class and the remaining time. Moreover,
monotonicity of the protection levels with respect to the booking class and the remaining time are proven. |
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Keywords: | Markov decision processes Revenue management Exponential utility Risk-sensitivity Log-convex functions |
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