Stochastic comparisons in revenue management under a discrete choice model of consumer behavior

Abstract

This study examines the monotonicity properties of expected revenue in a revenue management problem with respect to the consumers' choice behavior and the market size. The consumer behavior is described by a general discrete choice model. The firm decides which subset of fare products to offer at each time period. An example shows that the usual stochastic order relation in consumers' preference over the set of fare products is not sufficient for our naive intuition regarding the monotonicity to hold true. We provide sufficient conditions under which our intuition is valid. These conditions identify desirable changes in consumer behavior for the firm. © 2010 The Operations Research Society of Japan.