Airline revenue management games with simultaneous price and quantity competition

This paper treats airline revenue management under simultaneous price and quantity competition in a network. Within this setting, a competitor's demand is a function of his price as well as the competitor's price and booking limits. We present a model to optimize a competitor's behavior in a network revenue management game. To the best of our knowledge, our model is the first of this type. We also present an approach to compute a possibly approximate Nash equilibrium in the game assuming that the competitors make decisions based on our model. Since the model is non-linear, we compute equilibrium prices and booking limits separately. The procedure's performance is shown in a computational study. When both price competition and quantity competition are taken into account, prices as well as demands tend to increase leading to higher revenues compared to monopolistic prices. (C) 2016 Elsevier Ltd. All rights reserved.