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Teaching Revenue Management in an Engineering Department

Abstract: Revenue management is one of the newly emerging topics in the area of systems engineering, operations research, industrial engineering, and engineering management. While it is not expected to become a part of the core curriculum in any of these disciplines in the near future, it is being taught in many universities in the business schools that have programs in operations research. Since the ideas underlying revenue management are rooted in operations research, they can certainly be taught to engineering students. It took a long time for supply chain management to make its way from business schools to engineering schools, and engineering professors have mixed feelings about the fact that it took such a long time. It will be interesting to see if revenue management follows a similar route, and if it ever does how long it takes to make this journey. An outline of the course that was taught in an engineering department, along with a description of the course contents, will be presented. What the instructor learned while teaching the course will also be described. In addition, specific areas that were treated in detail and the projects provided for students will be discussed.

1. Introduction

Revenue management is a newly emerging topic in engineering management, business management, and operations research that is being taught as an elective in business schools of numerous universities in the US and Europe (Columbia University and Northwestern University in the US and INSEAD in Europe to name a few). Revenue management is a relatively new topic in operations research. It was born in the 1970s out of the pioneering work of Littlewood4. It was loosely associated with a bunch of techniques used by airlines to intelligently price their seats. However, it was in the mid-eighties that it gradually developed into a science. In those days, it was called “yield management.” American Airlines played a critical role in popularizing yield management in their operations.

Yield management for the most part attacked the pricing problem actually by solving a capacity-allocation problem. It was recognized in the 1990s that the classical pricing problems in which price was directly optimized without capacity considerations – an issue hitherto studied primarily by economists – had an important relationship with the yield-management

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Gosavi, A. (2009, June), Teaching Revenue Management In An Engineering Department Paper presented at 2009 Annual Conference & Exposition, Austin, Texas. 10.18260/1-2--4637