Pricing Models for Multi-leg and Multi-Level in Airline Revenue Management under Competitive Conditions

This paper studies the pricing models for airline revenue management under competitive conditions. Based on the influence of price fluctuation on the demands in the network, we constructed a pricing model by maximizing the profits of the airlines with multiple legs and multiple price levels. Then, by means of the KKT conditions, the pricing model was transformed into a mixed complementarity system so as to solve a Nash equilibrium solution. Finally, we used the GAMS language to perform the numerical examples and sensitivity analysis to verify the effectiveness of the model The numerical results indicate that the prices and revenues of airlines under competitive conditions are higher than those of airlines when they make independent decisions, and the larger the airlines' service network is, the higher the revenue is. The impact of higher prices on airline demand affects the airlines' optimal price negatively, and affects the competitor's optimal price positively.