15.071 | Spring 2017 | Graduate

# The Analytics Edge

8.2 Airline Revenue Management: An Introduction to Linear Optimization

## 8.2 Airline Revenue Management: An Introduction to Linear Optimization

### Quick Question

Suppose that, as in the previous video, regular seats cost \$617 and discount seats cost \$238. We are selling 166 seats. The demand for regular seats is 150 and the demand for discount seats is 150.

How many discount seats should we sell?

Exercise 1

Numerical Response

Explanation

Since regular seats give us more revenue, we should sell enough regular seats to meet the demand. This means that we will sell 150 regular seats. Since our capacity is 166, this leaves 16 seats to sell to discount customers.

What would our total revenue be, for both regular and discount seats, assuming that we have a full plane?

Exercise 2

Numerical Response

Explanation

We would sell 150 seats to regular customers, giving us a revenue of \$617*150, and 16 seats to discount customers, giving us a revenue of \$238*16. Our total revenue would be \$617*150 + \$238*16 = \$96,358.

CheckShow Answer

## Course Info

Spring 2017
##### Learning Resource Types
Lecture Videos
Lecture Notes
Problem Sets with Solutions