Capacity options for revenue management. Theory and applications in the air cargo industry
The author addresses is this book one of the most interesting aspects of the evolution for operations research/management science, the parallel development of long-term and short-term markets for capacity and output accompanied by a range of option and fixed-commitment contracts (i.e.: forwards and futures). This connects the key operating decisions of the equipment and technologies whose output is the focus of contracts. The author characterizes the form of option-based instruments required to support this evolution. He characterizes the optimal form of options on capacity and related forward contracts. The book has 8 chapters. After the introduction (chapter 1), chapter 2 describes the practice of capacity reservation and dynamic pricing at Lufthansa Cargo. The interaction between freight forwarders and carriers is the main focus. Shortcomings of existing contracts for the advanced sale of capacity are discussed. Chapter 3 gives an extensive overview of flexible contracts in the literature. Chapter 4 describes an innovative option pricing model for capacity reservation. Chapter 5 contains a comparative statics analysis of the model where fixed-commitment and option-type contracts are being benchmarked. The Pareto- or win-win efficiency of such contracts is illustrated. Chapter 6 regards the case of overbooking which is prevalent in the industry. Chapter 7 utilizes sample data obtained from Lufthansa Cargo AG to test the applicabability and impact of option typed contracts. Managerial implications are given in chapter 8. After chapter 1 (Introduction), chapter 2 (Capacity Agreements in the Air Cargo Industry) describes the air cargo industry and the case study: capacity reservation and dynamic pricing at Lufthansa Cargo AG. Chapter 3 (Literature Review on Supply Contracting and Revenue Management) regards advance sale of capacity, supply contracts and revenue management. Chapter 4 (Capacity-option Pricing Model) treats the model overview and setup, assumptions, the intermediary's problem, and the asset provider's problem. Model results and comparative statics (Chapter 5) are described by the framework of the analysis of contract types, reduction of double-marginalization, and a summary of the results. Chapter 6 (Model Extensions: Distribution of Profits, Correlations, and Overbooking) extends the model by a distribution of the profits, the independencies between the stochastic variables, and overbooking. Chapter 7 (Application Case Study in the Air Cargo Industry) contains the data sample, the estimation of model variables, and the results. Chapter 8 (Managerial Implications and Conclusions) gives managerial implications and implementation issues and further applications and future research.
- The valuation of options on capacity with cost and demand uncertainty
- Capacity reservation for capital-intensive technologies. An options approach.
- Cargo capacity management with allotments and spot market demand
- A Markov model for single-leg air cargo revenue management under a bid-price policy
- A revenue management model for products with two capacity dimensions
- An unpaired pickup and delivery problem with time dependent assignment costs: application in air cargo transportation
- A carrier-shipper contract under asymmetric information in the ocean transport industry
- Capacity reservation for capital-intensive technologies. An options approach.
- Pricing and allotment in a sea-cargo supply chain with reference effect: a dynamic game approach
- A capacity reservation game for suppliers with multiple blocks of capacity
- Standardized cargo network revenue management with dual channels under stochastic and time-dependent demand
- Cargo capacity management with allotments and spot market demand
- Strategies for managing the flexible capacity in the airline industry
- Tying mechanism for airlines' air cargo capacity allocation
- Pricing and balancing of the sea-cargo service chain with empty equipment repositioning
- An option-based revenue management procedure for strategic airline alliances
- Contracting in ocean shipping market under asymmetric information
- Callable products with dependent demands
- Stackelberg game model of railway freight pricing based on option theory
- The valuation of options on capacity with cost and demand uncertainty
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