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Dynamic pricing for vehicle ferries: using packing and simulation to optimize revenues

Dynamic pricing for vehicle ferries: using packing and simulation to optimize revenues
Dynamic pricing for vehicle ferries: using packing and simulation to optimize revenues
We propose an heuristic approach to the vehicle ferry revenue management problem, where the aim is to maximize the revenue obtained from the sale of vehicle tickets by varying the prices charged to different vehicle types, each occupying a different amount of deck space. Customers arrive and purchase tickets according to their vehicle type and their willingness-to-pay, which typically increases over time because customers purchasing tickets closer to departure tend to accept higher prices. The optimization problem can be solved using dynamic programming but the possible states in the selling season are the set of all feasible vehicle mixes that fit onto the ferry. This makes the problem intractable as the number of vehicle types and ferry size increases. We propose a state space reduction, which uses a vehicle ferry loading simulator to map each vehicle mix to a remaining-space state. This reduces the state space of the dynamic program. Our approach allows the value function to be approximated rapidly and accurately with a relatively coarse discretization of states. We present
simulations of the selling season using this reduced state space to validate the method. The vehicle ferry loading simulator was developed in collaboration with a vehicle ferry company and addresses real-world constraints such as manoeuvrability, elevator access, strategic parking gaps, vehicle height constraints and ease of implementation of the packing solutions.
Revenue management; Packing; Transportation; Dynamic pricing
0377-2217
1-31
Bayliss, Christopher
5fb04968-5cbf-40d8-84b0-02e8c7e94a59
Currie, Christine
dcfd0972-1b42-4fac-8a67-0258cfdeb55a
Bennell, Julia A
38d924bc-c870-4641-9448-1ac8dd663a30
Martinez Sykora, Antonio
2f9989e1-7860-4163-996c-b1e6f21d5bed
Bayliss, Christopher
5fb04968-5cbf-40d8-84b0-02e8c7e94a59
Currie, Christine
dcfd0972-1b42-4fac-8a67-0258cfdeb55a
Bennell, Julia A
38d924bc-c870-4641-9448-1ac8dd663a30
Martinez Sykora, Antonio
2f9989e1-7860-4163-996c-b1e6f21d5bed

Bayliss, Christopher, Currie, Christine, Bennell, Julia A and Martinez Sykora, Antonio (2018) Dynamic pricing for vehicle ferries: using packing and simulation to optimize revenues. European Journal of Operational Research, 1-31. (doi:10.1016/j.ejor.2018.08.004).

Record type: Article

Abstract

We propose an heuristic approach to the vehicle ferry revenue management problem, where the aim is to maximize the revenue obtained from the sale of vehicle tickets by varying the prices charged to different vehicle types, each occupying a different amount of deck space. Customers arrive and purchase tickets according to their vehicle type and their willingness-to-pay, which typically increases over time because customers purchasing tickets closer to departure tend to accept higher prices. The optimization problem can be solved using dynamic programming but the possible states in the selling season are the set of all feasible vehicle mixes that fit onto the ferry. This makes the problem intractable as the number of vehicle types and ferry size increases. We propose a state space reduction, which uses a vehicle ferry loading simulator to map each vehicle mix to a remaining-space state. This reduces the state space of the dynamic program. Our approach allows the value function to be approximated rapidly and accurately with a relatively coarse discretization of states. We present
simulations of the selling season using this reduced state space to validate the method. The vehicle ferry loading simulator was developed in collaboration with a vehicle ferry company and addresses real-world constraints such as manoeuvrability, elevator access, strategic parking gaps, vehicle height constraints and ease of implementation of the packing solutions.

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More information

Accepted/In Press date: 3 August 2018
e-pub ahead of print date: 25 August 2018
Keywords: Revenue management; Packing; Transportation; Dynamic pricing

Identifiers

Local EPrints ID: 423540
URI: https://eprints.soton.ac.uk/id/eprint/423540
ISSN: 0377-2217
PURE UUID: af3ba4a5-372c-48ce-9e09-0802a1ce44b4
ORCID for Christine Currie: ORCID iD orcid.org/0000-0002-7016-3652

Catalogue record

Date deposited: 25 Sep 2018 16:30
Last modified: 14 Mar 2019 01:44

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