Allocation of flexible and indivisible resources with decision postponement and demand learning
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Authors
Bish, Ebru K.
Lin, Kyle Y.
Hong, Seong-Jong
Subjects
Retailing
Resource flexibility
Demand forecast
Capacity allocation
Perishable inventory
Resource flexibility
Demand forecast
Capacity allocation
Perishable inventory
Advisors
Date of Issue
2008
Date
Publisher
Language
Abstract
We consider a firm that uses two perishable resources to satisfy two demand types. Resources are flexible such that
each resource can be used to satisfy either demand type. Resources are also indivisible such that the entire resource must
be allocated to the same demand type. This type of resource flexibility can be found in different applications such as
movie theater complexes, cruise lines, and airlines. In our model, customers arrive according to independent Poisson processes,
but the arrival rates are uncertain. Thus, the manager can learn about customer arrival rates from earlier demand
figures and potentially increase the sales by postponing the resource allocation decision. We consider two settings, and
derive the optimal resource allocation policy for one setting and develop a heuristic policy for the other. Our analysis
provides managerial insights into the effectiveness of different resource allocation mechanisms for flexible and indivisible
resources.
Type
Article
Description
Series/Report No
Department
Operations Research
Organization
Identifiers
NPS Report Number
Sponsors
Funding
Format
Citation
European Journal of Operational Research, Vol. 187, (2008), pp. 429–441
Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.