Discrete dynamic pricing and application of network revenue management for FlixBus

We consider a real discrete pricing problem in network revenue management for FlixBus. We improve the company's current pricing policy by an intermediate optimization step using booking limits from standard deterministic linear programs. We pay special attention to computational efficiency. FlixBus' strategic decision to allow for low-cost refunds might encourage large group bookings early in the booking process. In this context, we discuss counter-intuitive findings comparing booking limits with static bid price policies. We investigate the theoretical question whether the standard deterministic linear program for network revenue management does provide an upper bound on the optimal expected revenue if customer's willingness to pay varies over time

Stochastic programming for multiple-leg network revenue management

Airline seat inventory control is a very profitable tool in the airline industry. Mathematical programming models provide booking limits or bid-prices for all itineraries and fare classes based on demand forecasts. But the actual revenue generated in the booking process fails to meet expectations. Simple deterministic models based on expected demand generate better revenue than more advanced probabilistic models. Recently suggested models put even more effort into demand forecasting. We will show that the dynamic booking process rather than the demand forecasts needs to be addressed. In particular the nesting strategies applied in booking control will counter-effect the profitability of advanced estimation of booking limits and bid-prices.simulation;revenue management;mathematical programming

Dynamic pricing under customer choice behavior for revenue management in passenger railway networks

Revenue management (RM) for passenger railway is a small but active research field with an increasing attention during the past years. However, a detailed look into existing research shows that most of the current models in theory rely on traditional RM techniques and that advanced models are rare. This thesis aims to close the gap by proposing a state-of-the-art passenger railway pricing model that covers the most important properties from practice, with a special focus on the German railway network and long-distance rail company Deutsche Bahn Fernverkehr (DB). The new model has multiple advantages over DB’s current RM system. Particularly, it uses a choice-based demand function rather than a traditional independent demand model, is formulated as a network model instead of the current leg-based approach and finally optimizes prices on a continuous level instead of controlling booking classes. Since each itinerary in the network is considered by multiple heterogeneous customer segments (e.g., differentiated by travel purpose, desired departure time) a discrete mixed multinomial logit model (MMNL) is applied to represent demand. Compared to alternative choice models such as the multinomial logit model (MNL) or the nested logit model (NL), the MMNL is significantly less considered in pricing research. Furthermore, since the resulting deterministic multi-product multi-resource dynamic pricing model under the MMNL turns out to be non- linear non-convex, an open question is still how to obtain a globally optimal solution. To narrow this gap, this thesis provides multiple approaches that make it able to derive a solution close to the global optimum. For medium-sized networks, a mixed-integer programming approach is proposed that determines an upper bound close to the global optimum of the original model (gap < 1.5%). For large-scale networks, a heuristic approach is presented that significantly decreases the solution time (by factor up to 56) and derives a good solution for an application in practice. Based on these findings, the model and heuristic are extended to fit further price constraints from railway practice and are tested in an extensive simulation study. The results show that the new pricing approach outperforms both benchmark RM policies (i.e., DB’s existing model and EMSR-b) with a revenue improvement of approx. +13-15% over DB’s existing approach under a realistic demand scenario. Finally, to prepare data for large-scale railway networks, an algorithm is presented that automatically derives a large proportion of necessary data to solve choice-based network RM models. This includes, e.g., the set of all meaningful itineraries (incl. transfers) and resources in a network, the corresponding resource consumption and product attribute values such as travel time or number of transfers. All taken together, the goal of this thesis is to give a broad picture about choice-based dynamic pricing for passenger railway networks

Booking limits and bid price based revenue management policies in rail freight transportation

In this paper, the possibility and potential benefits of implementing discriminatory policies in rail freight transportation are analyzed, with the aim of revenue maximization. A regular, cyclic, single train service with fixed composition and capacity is studied. The problem is decomposed into discrete time periods. Transportation requests arise randomly over time, and the decision of either accept or reject a certain request has to be made. The problem is formulated via dynamic programming, and the deterministic approximations of the problem are used in order to formulate booking limits and bid price policies. Results obtained are compared with those of standard first come – first served policy, which is implemented by the Serbian railways. Although not acceptable in all contexts, the proposed aggressive policies demonstrated promising benefits

Outlier detection in network revenue management

This paper presents an automated approach for providing ranked lists of outliers in observed demand to support analysts in network revenue management. Such network revenue management, e.g. for railway itineraries, needs accurate demand forecasts. However, demand outliers across or in parts of a network complicate accurate demand forecasting, and the network structure makes such demand outliers hard to detect. We propose a two-step approach combining clustering with functional outlier detection to identify outlying demand from network bookings observed on the leg level. The first step clusters legs to appropriately partition and pool booking patterns. The second step identifies outliers within each cluster and uses a novel aggregation method across legs to create a ranked alert list of affected instances. Our method outperforms analyses that consider leg data without regard for network implications and offers a computationally efficient alternative to storing and analysing all data on the itinerary level, especially in highly-connected networks where most customers book multi-leg products. A simulation study demonstrates the robustness of the approach and quantifies the potential revenue benefits from adjusting demand forecasts for offer optimisation. Finally, we illustrate the applicability based on empirical data obtained from Deutsche Bahn

Business to business online revenue management.

With the emergence of the Internet, electronic commerce (e-commerce), revenue management and especially applications that combine both are becoming increasingly an area of innovation for service industries. E-commerce has introduced efficiencies across the service chain and it has allowed improvements to take place within and across organizations. Revenue management when combined with ecommerce and done online not only improves resource management but it can be used as a strategic tool to gain competitive advantage. This chapter examines the current approaches and future trends in these very exciting and promising areas

New heuristics for the stochastic tactical railway maintenance problem

Efficient methods have been proposed in the literature for the management of a set of railway maintenance operations. However, these methods consider maintenance operations as deterministic and known a priori. In the stochastic tactical railway maintenance problem (STRMP), maintenance operations are not known in advance. In fact, since future track conditions can only be predicted, maintenance operations become stochastic. STRMP is based on a rolling horizon. For each month of the rolling horizon, an adaptive plan must be addressed. Each adaptive plan becomes deterministic, since it consists of a particular subproblem of the whole STRMP. Nevertheless, an exact resolution of each plan along the rolling horizon would be too time-consuming. Therefore, a heuristic approach that can provide efficient solutions within a reasonable computational time is required. Although STRMP has already been introduced in the literature, little work has been done in terms of solution methods and computational results. The main contributions of this paper include new methodology developments, a linear model for the deterministic subproblem, three efficient heuristics for the fast and effective resolution of each deterministic subproblem, and extensive computational results

Stochastic programming for multiple-leg network revenue management

Airline seat inventory control is a very profitable tool in the airline industry. Mathematical programming models provide booking limits or bid-prices for all itineraries and fare classes based on demand forecasts. But the actual revenue generated in the booking process fails to meet expectations. Simple deterministic models based on expected demand generate better revenue than more advanced probabilistic models. Recently suggested models put even more effort into demand forecasting. We will show that the dynamic booking process rather than the demand forecasts needs to be addressed. In particular the nesting strategies applied in booking control will counter-effect the profitability of advanced estimation of booking limits and bid-prices

Paying Less for Train Connections with MOTIS

Finding cheap train connections for long-distance traffic is algorithmically a hard task due to very complex tariff regulations. Several new tariff options have been developed in recent years, partly to react on the stronger competition with low-cost airline carriers. In such an environment, it becomes more and more important that search engines for travel connections are able to find special offers efficiently. We have developed a multi-objective traffic information system (MOTIS) which finds all attractive train connections with respect to travel time, number of interchanges, and ticket costs. In contrast, most servers for timetable information as well as the theoretical literature on this subject focus only on travel time as the primary objective, and secondary objectives like the number of interchanges are treated only heuristically. The purpose of this paper is to show by means of a case study how several of the most common tariff rules (including special offers) can be embedded into a general multi-objective search tool. Computational results show that a multi-objective search with a mixture of tariff rules can be done almost as fast as just with one regular tariff. For the train schedule of Germany, a query can be answered within 1.9s on average on a standard PC