A review of revenue management : recent generalizations and advances in industry applications

Originating from passenger air transport, revenue management has evolved into a general and indispensable methodological framework over the last decades, comprising techniques to manage demand actively and to further improve companies’ profits in many different industries. This article is the second and final part of a paper series surveying the scientific developments and achievements in revenue management over the past 15 years. The first part focused on the general methodological advances regarding choice-based theory and methods of availability control over time. In this second part, we discuss some of the most important generalizations of the standard revenue management setting: product innovations (opaque products and flexible products), upgrading, overbooking, personalization, and risk-aversion. Furthermore, to demonstrate the broad use of revenue management, we survey important industry applications beyond passenger air transportation that have received scientific attention over the years, covering air cargo, hotel, car rental, attended home delivery, and manufacturing. We work out the specific revenue management-related challenges of each industry and portray the key contributions from the literature. We conclude the paper with some directions for future research

Truthful Mechanisms For Resource Allocation And Pricing In Clouds

A major challenging problem for cloud providers is designing efficient mechanisms for Virtual Machine (VM) provisioning and allocation. Such mechanisms enable the cloud providers to effectively utilize their available resources and obtain higher profits. Recently, cloud providers have introduced auction-based models for VM provisioning and allocation which allow users to submit bids for their requested VMs. We formulate the dynamic VM provisioning and allocation problem for the auction-based model as an integer program considering multiple types of resources. We then design truthful greedy and optimal mechanisms for the problem such that the cloud provider provisions VMs based on the requests of the winning users and determines their payments. We show that the proposed mechanisms are truthful, that is, the users do not have incentives to manipulate the system by lying about their requested bundles of VM instances and their valuations. We perform extensive experiments using real workload traces in order to investigate the performance of the proposed mechanisms. Our proposed mechanisms achieve promising results in terms of revenue for the cloud provider

Management of Cloud Infastructures: Policy-Based Revenue Optimization

Competition on global markets forces many enterprises to make use of new applications, reduce process times and at the same time cut the costs of their IT-infrastructure. To achieve this, it is necessary to maintain a high degree of flexibility with respect to the IT-infrastructure. Facing this challenge the idea of Cloud computing has been gaining interest lately. Cloud services can be accessed on demand without knowledge of the underlying infrastructure and have already succeeded in helping companies deploy products faster. Using Cloud services the New York Times managed to convert scanned images containing 11 million articles into PDF within 24 hours at a cost of merely 240 US-$. However Cloud providers will only offer their services, if they can realize sufficient benefit. To achieve this, the efficiency of Cloud infrastructure management must be increased. To this end we propose the use of concepts from revenue management and further enhancements

Provably near-optimal algorithms for multi-stage stochastic optimization models in operations management

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, Operations Research Center, 2012.Cataloged from PDF version of thesis.Includes bibliographical references (p. 157-165).Many if not most of the core problems studied in operations management fall into the category of multi-stage stochastic optimization models, whereby one considers multiple, often correlated decisions to optimize a particular objective function under uncertainty on the system evolution over the future horizon. Unfortunately, computing the optimal policies is usually computationally intractable due to curse of dimensionality. This thesis is focused on providing provably near-optimal and tractable policies for some of these challenging models arising in the context of inventory control, capacity planning and revenue management; specifically, on the design of approximation algorithms that admit worst-case performance guarantees. In the first chapter, we develop new algorithmic approaches to compute provably near-optimal policies for multi-period stochastic lot-sizing inventory models with positive lead times, general demand distributions and dynamic forecast updates. The proposed policies have worst-case performance guarantees of 3 and typically perform very close to optimal in extensive computational experiments. We also describe a 6-approximation algorithm for the counterpart model under uniform capacity constraints. In the second chapter, we study a class of revenue management problems in systems with reusable resources and advanced reservations. A simple control policy called the class selection policy (CSP) is proposed based on solving a knapsack-type linear program (LP). We show that the CSP and its variants perform provably near-optimal in the Halfin- Whitt regime. The analysis is based on modeling the problem as loss network systems with advanced reservations. In particular, asymptotic upper bounds on the blocking probabilities are derived. In the third chapter, we examine the problem of capacity planning in joint ventures to meet stochastic demand in a newsvendor-type setting. When resources are heterogeneous, there exists a unique revenue-sharing contract such that the corresponding Nash Bargaining Solution, the Strong Nash Equilibrium, and the system optimal solution coincide. The optimal scheme rewards every participant proportionally to her marginal cost. When resources are homogeneous, there does not exist a revenue-sharing scheme which induces the system optimum. Nonetheless, we propose provably good revenue-sharing contracts which suggests that the reward should be inversely proportional to the marginal cost of each participant.by Cong Shi.Ph.D

Resource Management In Cloud And Big Data Systems

Cloud computing is a paradigm shift in computing, where services are offered and acquired on demand in a cost-effective way. These services are often virtualized, and they can handle the computing needs of big data analytics. The ever-growing demand for cloud services arises in many areas including healthcare, transportation, energy systems, and manufacturing. However, cloud resources such as computing power, storage, energy, dollars for infrastructure, and dollars for operations, are limited. Effective use of the existing resources raises several fundamental challenges that place the cloud resource management at the heart of the cloud providers\u27 decision-making process. One of these challenges faced by the cloud providers is to provision, allocate, and price the resources such that their profit is maximized and the resources are utilized efficiently. In addition, executing large-scale applications in clouds may require resources from several cloud providers. Another challenge when processing data intensive applications is minimizing their energy costs. Electricity used in US data centers in 2010 accounted for about 2% of total electricity used nationwide. In addition, the energy consumed by the data centers is growing at over 15% annually, and the energy costs make up about 42% of the data centers\u27 operating costs. Therefore, it is critical for the data centers to minimize their energy consumption when offering services to customers. In this Ph.D. dissertation, we address these challenges by designing, developing, and analyzing mechanisms for resource management in cloud computing systems and data centers. The goal is to allocate resources efficiently while optimizing a global performance objective of the system (e.g., maximizing revenue, maximizing social welfare, or minimizing energy). We improve the state-of-the-art in both methodologies and applications. As for methodologies, we introduce novel resource management mechanisms based on mechanism design, approximation algorithms, cooperative game theory, and hedonic games. These mechanisms can be applied in cloud virtual machine (VM) allocation and pricing, cloud federation formation, and energy-efficient computing. In this dissertation, we outline our contributions and possible directions for future research in this field

Essays on Entertainment Analytics

This thesis explores live entertainment analytics and revenue management allocation strategies for live entertainment. In Chapter two, we look at empirical factors that effect the success of Broadway shows. How well-known actors (stars) effect film revenues has been a recurring question of entertainment producers and academics. Because a film cannot be disentangled from a star involved, researchers have long struggled to rule out ``reverse-causality\u27\u27 - that stars have access to higher quality movies. Using a novel data set that includes Broadway show revenues and actor usage, we provide a fixed-effects regression and case studies. We find across multiple specifications that increases in star power in a show improve revenue. Motivated by social grouping and the associated operational challenges, in Chapter three we formulate and study extensions to the Dynamic Stochastic Knapsack Problem (DSKP). We compartmentalize the knapsack according to predefined reward-to-weight ratios, and incorporate a stochastic interaction between the offered set of open compartments and the item placement. Using a specific interaction function inspired by customer choice in the entertainment industry, we provide an algorithm to determine the optimal solution and obtain insights into structural properties. Given the computational complexity of the dynamic program we also propose and analyze via simulation a heuristic algorithm. In Chapter four, in a large sequence of simulations, we propose and study practical heuristic algorithms on which seats should be offered to requests. We propose an algorithm that offers revenue improvements from a ``naive\u27\u27 policy on the order of 5-10%. Throughout, we aim for managerial relevance, providing implications to current techniques both in strategy as well as operations