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54 ISE Magazine | www.iise.org/ISEmagazine Research Better bid-based price controls In recent years, revenue management has received considerable attention in research and practice. It aims to maxi- mize overall revenue as well as capac- ity utilization in markets with highly uncertain demand. Capacity control, a key element in revenue management, is concerned with the allocation of fixed perishable capacity to customer requests that arrive over a finite time horizon. Bid price-based controls are the most common and practical strategies used. The bid price represents the opportunity cost of accepting a customer request; dynamically arriving customer requests are accepted if the fare offered by the customer exceeds this opportunity cost. But it may be profitable to reject a book- ing request in order to be able to accept another booking request that is expected to arrive in the future. In "Metaheuristic-Based Simulation Optimization Approach to Network Revenue Management with an Im- proved Self-Adjusting Bid Price Func- tion," Kemal Subulan, professor Adil Baykaso ğ lu and associate professors Derya Eren Akyol and Gokalp Yildiz of Dokuz Eylül University in Turkey study the capacity control problem of an air- line network. They work on a dynamic bid-based price control that includes the possible effect of the competitor's pric- ing strategies on the customer demand. Therefore, in addition to reserved ca- pacity, the studied bid-price-based con- trol mechanism depends also on the competitor's price increase/decrease. The authors examine a system with a single competitor where the bid prices are updated throughout the booking horizon based on the online demand information. Another feature of the study is that booking cancellations are also taken into account within capacity control. Different metaheuristics and a commercial heuristic are used for fine- tuning the parameters of the bid price function through a simulation optimi- zation procedure. Numerical experiments show that the extended bid price control mechanism can result in significant revenue savings over the original self-adjusting bid price function. The current work can be ex- tended by also considering the timing of booking cancellations and overbook- ing conditions. In addition, the effect of multiple competitors can be studied. CONTACT: Adil Baykaso ğ lu; adil.baykasoglu@ deu.edu.tr; 90 (232) 3017600; Department of In- dustrial Engineering, Faculty of Engineering, Dokuz Eylül University, Tinaztepe Campus, 35160 Buca, Izmir, Turkey Jia ju Ja ) Shi is the Caroly . Stewart Chair a d Professor i he H. Milto tewart School of I dustrial a d Systems E gi eer- i g at the Georgia I stitute of Tech ology. He is editor-i -chief of IISE Transactions, a academicia of the I ter atio al Academy for Quality a d a fellow of IISE, ASME a d INFORMS. Sarah M. Rya s the Joseph Walkup Profes- sor of I dustrial a d Ma ufacturi g Systems E gi eeri g at Iowa State U iversity. She is editor-i -chief of The Engineering Econo- mist a d a fellow of IISE. In this research summary we highlight one of the articles from Volume 62, No. 1 of The Engineering Economist. Here the authors develop an improved bid-based price control for airline revenue management. Revenue is increased by accounting for a competitor's pricing decisions and booking cancellations while employing simulation optimization to fine-tune the parameters of the bid price function used for capacity control. Associate professors Gokalp Yildiz (from left), Derya Eren Akyol, professor Adil Baykaso ğ lu and Kemal Subulan discovered an extended bid price control mechanism that can save significant revenue. IISE Transactions is IISE's flagship research journal and is published monthly. It aims to foster exchange among researchers and practitioners in the industrial engineering community by publishing papers that are grounded in science and mathematics and motivated by engineering applications. The Engineering Economist is a quarterly refereed journal published jointly by IISE and the American Society of Engineering Education. Devoted to issues of capital investment, its topics include economic decision analysis, capital investment analysis, research and development decisions, cost estimating and accounting, and public policy analysis. To subscribe, call (800) 494-0460 or (770) 449-0460. About the journals