Department of Decision Sciences
Permanent link for this collection
Browse
Browsing Department of Decision Sciences by Author "Fung, Richard Y. K."
Now showing 1 - 2 of 2
Results Per Page
Sort Options
Item An option-based capacity control mechanism for code-sharing alliances(2023) Wang, Xiaojia; Fung, Richard Y. K.This study addresses capacity control problems in code-sharing alliances, which deal with the determination of member airlines' booking limits. We propose an innovative option-based capacity control mechanism to overcome the drawback of inflexibility in blocked seat allotment for a two-airline code-sharing alliance. The mechanism incorporates the concept of a straddle, an advanced option strategy in finance, to allow member airlines the flexibility to tackle not only downward but also upward demand variations during the booking process. We design simulation experiments and use a case illustration to show scenarios when the code-sharing alliance can benefit from the proposed mechanism.Item Strategic analyses of applying an option-based hedging mechanism in parallel airline alliances(2023) Wang, Xiaojia; Fung, Richard Y. K.The extant literature proposes an option-based hedging mechanism for airlines in a parallel alliance to transfer bumped passengers to their alliance partner’s flight. This paper extends this literature by conducting strategic analyses and developing a two-stage simulation-based algorithm to identify the best strategy for applying the hedging mechanism. Specifically, the best strategy refers to the best number of options for the allied carriers to transact. The authors show that there exists a robust result of the best number of options, and it is obtained under the objective of maximizing alliance-wide revenue. The result of this paper can provide direct guidance to the management of airlines on the best practice of hedging ex-post overbooking risks and matching supply with demand.