Case—Starting with Good Inputs: Unconstraining Demand Data in Revenue Management

Mark Ferguson - mark.ferguson@mgt.gatech.edu
College of Management, Georgia Institute of Technology, Atlanta, Georgia 30332
Carrie Queenan - c_queenan@nd.edu
Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556

Abstract

Sales of goods and services are often limited by supply. This limitation restricts the knowledge of the true parameter values for the underlying demand distributions, values needed to calculate optimal protection levels in a revenue management system. We provide a teaching module and a case study to introduce students to the dangers of using "constrained demand." The teaching module illustrates the negative financial impact of failing to unconstrain demand data. The case study provides realistic constrained demand data that students can use to practice unconstraining methods, such as the commonly used averaging method. We have used these materials successfully in MBA and executive education classes on revenue management.

Key words
unconstraining; revenue management; demand estimation

History
Received: May 2008; accepted: December 2008. This paper was with the authors 3 months for 3 revisions.

Download the PDF
pdf 10.1287/ited.9.3.180

Supplementary Materials

Citation Information
Ferguson, M., C. Queenan. 2009. Case—Starting with Good Inputs: Unconstraining Demand Data in Revenue Management. INFORMS Trans. Ed. 9(3) 180-187. Available online at http://ite.pubs.informs.org/.

DOI: 10.1287/ited.1090.0032ca

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