Study, Based On The Flexibility Of Network Revenue Management

Network revenue management, named origin-destination control as well, means allocating limited seats under stochastic demands in the hub-and-spoke network environment to maximize revenue. Flexible product is a mixture of several substitutes in the same market offered by a constrained supplier using a sale or booking process. This thesis introduces flexible product into network revenue management, aiming to fulfill the airlines' best revenue and reduce the risk of demand uncertainty.Network revenue management and flexible product revenue management are introduced firstly. Based on the EMR model of Wollmer and the flexible product model of Gallego and Phillips, two models are set, which are the two-phase, multi-hub network model without flexible product and the two-phase, multi-hub network model with flexible product. Then, using the EMSR theory, under the two-phase sale process and typical demand distribution functions, the best seat allocating solution of the two models and the pricing strategy of flexible product are worked out. Numerical simulation is used finally to illustrate that flexible product is helpful to reduce the demand uncertainty under typical discount. This enables company better revenue.