Airline Booking Limit Competition Game Under Differentiated Fare Structure

Main Article Content

Joonkyum Lee
Bumsoo Kim

Keywords

Revenue Management, Booking Limit, Competition Game, Nash Equilibrium

Abstract

We address a two-firm booking limit competition game in the airline industry. We assume aggregate common demand, and differentiated ticket fare and capacity, to make this study more realistic. A game theoretic approach is used to analyze the competition game. The optimal booking limits and the best response functions are derived. We show the existence of a pure Nash equilibrium and provide the closed-form equilibrium solution. The location of the Nash equilibrium depends on the relative magnitude of the ratios of the full and discount fares. We also show that the sum of the booking limits of the two firms remains the same regardless of the initial allocation proportion of the demand.

Downloads

Download data is not yet available.
Abstract 47 | PDF Downloads 46