EURO Working Group on Stochastic Modelling

FIRST MEETING: 19-21 APRIL 2006, AMSTERDAM

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Abstracts

Christiane Barz, Risk-Sensitive Capacity Control in Revenue Management

Both the static and dynamic single-leg revenue management problem are studied from the perspective of a decision maker exhibiting constant absolute risk aversion. 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 can be shown that an optimal booking policy can be characterized by a protection level that depends on the requested booking class and the remaining time. The protection levels can be proven to be monotone with respect to the booking class and the remaining time.