Technical Note—Product-Based Approximate Linear Programs for Network Revenue Management

Abstract

A Novel and Promising Approximation for Network Revenue Management In “Product-Based Approximate Linear Programs for Network Revenue Management,” Zhang, Samiedaluie, and Zhang propose a novel separable piecewise linear (SPL) approximation for the network revenue management problem. The coefficients of the proposed SPL approximation can be interpreted as each product’s revenue contribution to the value of each resource in a given period, which provides more granular information compared with the existing resource-based SPL approximation in the literature. The new approximation provides more flexibility for policy construction. Furthermore, the new approximation opens the opportunity to derive a set of valid inequalities to further improve the computational performance and achieve additional gains in the expected revenue. Computational experiments with instances of various network structures and parameters demonstrate its efficacy: the new approximation leads to bid-price policies generating higher expected revenues and demonstrates better performance in terms of both computational efficiency and numerical stability.