Network Revenue Management with Dependent Demands

Network revenue management models have traditionally been developed under the independent demand assumption. In the independent demand setting, customers arrive into the system with the intention to purchase a particular product. If this product is available, they purchase it. Otherwise, they leave the system. This model is reasonable when products are well differentiated so that customers do not substitute between products. The independent demand model is harder to justify when there are few differences, other than price, between fares. Indeed, a more general setting is needed when the demand for each product depends heavily on whether or not other products are available for sale. This setting gives the firms the opportunity to shape the demand for each product by adjusting the offer set made available to the customer.