Visiting Lecturer Program (5)

Speaker: Masoud Talebian
Ph.D. Candidate
Department of Industrial Engineering and Operations Research, Columbia University, New York, USA

Title: Revenue Management: Callable and Flexible Tickets

1
Local organizer: Ms. Katayoun Salamati

 

Time: Aug, 2005
Location: Department of Industrial Engineering, Sharif University of Technology, Tehran

2
Local organizer: Mr. Hamid Akbari

Time: Wednesday, July 27, 2005
Location: School of Management and Economics, Sharif University of Technology, Tehran

Abstract:

In this talk, first Revenue Management will be defined. Revenue management is a management approach to optimizing revenue, often based on managing revenues around capacity and timing (yield management), for different market segments or from different sources of funding.
Next, the concept of callable products and flexible products will be defined.
A callable product is a unit of capacity sold at the low fare to self-selected buyers who willingly grant the capacity provider the option to “call” the capacity at a pre-specified recall price. A flexible product is a menu of two or more alternative, typically substitute products offered by a constrained supplier using a sales or booking process. To make it more clear consider these two cases:
A flexible ticket: such as a morning flight from Tehran to Mashad, is sold at a discount to self-selected customers who grant the airline the option of rescheduling and shifting the time of the flight near the end of the booking process (for example they might call you one day before the flight and change you to a flight leaving 2 hours later.)
A callable ticket: such as a morning flight from Tehran to Mashad, is sold at full price to self-selected customers who allow the airline the option of rescheduling the time of the flight near the end of the booking process in exchange for a pre-specified compensation (for example, they might call you one day before the flight and change you to a flight leaving 2 hours later.)
It has been discussed that the addition of callable products gives the capacity provider more flexibility in managing capacity and can significantly increase revenues. Some cases have been investigated to show how callable products can significantly improve expected profits, reduce denied boarding costs, and decrease the fraction of denied boarding passengers. Benefits from offering flexible products vary as a function of the time horizon, discount, competition, and other parameters.