Principles for simulations in revenue management

Simulations are commonly applied in Revenue Management (RM) to give proof of new concepts. Most publications in this area focus on the methodical part and disregard a detailed description of the simulation in use. The underlying assumptions and simplifications, however, have a strong impact on the results. Although the make-up of a simulation environment always depends on the investigation undertaken, some general rules for simulations in RM can be established. In this paper, we provide a guideline for developing a stochastic simulation model to be used for analyses in RM. Many occurring questions cannot be universally answered. Therefore, we point out difficult decisions and give advices concerning setup, input data and calibration as well as the modelling of demand, forecast and optimisation. Finally, we present a specific simulation study as an example.