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Keywords:

  • revenue management;
  • overbooking;
  • differential pricing;
  • product protection;
  • planned upgrades;
  • short selling

Abstract

The objective of this article is to lay out the fundamental concepts that make up the field known within operations research (OR) as revenue management (RM). Five basic ideas (overbooking, differential pricing, product protection, planned upgrades, and short-selling) and their variants provide the conceptual foundations of the practice of RM and motivate OR research in RM. Understanding these concepts will provide an understanding of the practice of RM and the RM algorithms in use today, and will also help to understand some of the new business practices that we see appearing every day.