Template-Type: ReDIF-Paper 1.0
Author-Name: Pak, K.
Author-Name-Last: Pak
Author-Name: Dekker, R.
Author-Name-Last: Dekker
Author-Name-First: Rommert
Author-Person: pde16
Title: Cargo Revenue Management: Bid-Prices for a 0-1 Multi Knapsack Problem
Abstract: 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.
Creation-Date: 2004-08-06
File-URL: https://repub.eur.nl/pub/1449/ERS%202004%20055%20LIS.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2004-055-LIS
Classification-JEL: C61, M, M11, R4
Keywords: cargo transportation, multi-dimensional knapsack, on-line knapsack, revenue management
Handle: RePEc:ems:eureri:1449