Rice University

COLLOQUIUM

Department of Statistics

September 8, 1997
2:10 P.M.
Duncan Hall CEB 1070 (Gate 16)
Coffee 2:00, Duncan Hall CE1044

John Salch
Rice University and Pros Strategic Solutions, Inc.

Airline Passenger Demand Unconstraining:
An Application of the EM Algorithm

Abstract: Why does it often cost more to fly one-way than round-trip? This question can best be answered through a description of revenue management. Revenue management, applied to airline seat demand, requires forecasting and optimization. The data are often right censored, requiring the use of methods such as the EM algorithm (Little, Rubin 1987). A short description of revenue management will be given. The problem of forecasting airline seat demand will be proposed along with an application of the EM algorithm to "closed" fare classes. A small simulation study will be described. The role of PROS Strategic Solutions, Inc. as a revenue management software provider will be discussed.

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