A dynamic model for railway freight overbooking

Abstract

In order to apply overbooking idea in Chinese railway freight industry to improve revenue, a Markov decision process (dynamic programming) model for railway freight reservation was formulated and the overbooking limit level was proposed as a control policy. However, computing the dynamic programming treatment needs six nested loops and this will be burdensome for real-world problems. To break through the calculation limit, the properties of value function were analyzed and the overbooking protection level was proposed to reduce the calculating quantity. The simulation experiments show that the overbooking protection level for the lower-fare class is higher than that for the higher-fare class, so the overbooking strategy is nested by fare class. Besides, by analyzing the influence on the overbooking strategy of freight arrival probability and cancellation probability, the proposed approach is efficient and also has a good application prospect in reality. Also, compared with the existing reservation (FCFS), the overbooking strategy performs better in the fields of vacancy reduction and revenue improvement.

Keywords

revenue management / railway freight / overbooking / dynamic model

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