Cargo Revenue Management: Bid-Prices for a 0-1 Multi Knapsack Problem
2004-08-06
Research Paper
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Revenue management is the practice of selecting those customers that generate the maximum revenue from a fixed and perishable capacity. Cargo revenue management differs from the well-known passenger revenue management problem by the fact that its capacity constraint is 2-dimensional, i.e. weight and volume, and that the weight, volume and profit of each booking request are random and continuous variables. This leads to a multi-dimensional on-line knapsack problem. We show that a bid-price acceptance policy is asymptotically optimal if demand and capacity increase proportionally and the bid-prices are set correctly. We provide a heuristic to set the bid-prices based on a greedy algorithm for the multi-knapsack problem proposed by Rinnooy Kan et al. (1993). A test case shows that these bid-prices perform better than the traditional LP-based bid-prices that do not perform well at all for this problem.
- C61 : Optimization Techniques; Programming Models; Dynamic Analysis
- M : Business Administration and Business Economics; Marketing; Accounting
- R4 : Transportation Systems
- M11 : Production Management
- bid-price
- capacity
- booking
- request
- management
- problem
- revenue
- booking request
- policy
- cargo
- booking requests
- weight
- knapsack
- volume
- value
- approximation scheme
- profit
- shipment
- passenger revenue management
- passenger
