Decision Making of Hotel Room Allocation: A Statistic Game

We established a two-player two-fare-class (high-fare and low-fare) static game model to solve the hotel room inventory control problem. Under this game theoretic setting, we obtained the optimal rationing policies for the two hotels under competitive situations. Our study indicates some important managerial implications on this revenue management problem: First, our game model indicates that as a best response, one hotel should always decrease its booking limit for low-fare customer by more than one unit if another hotel increases the low-fare booking limit by one unit, and vice versa. Secondly, we have proved the existence and uniqueness of Nash equilibrium in the competitive situation. Finally, we have presented the structural properties of Nash equilibria in different situations.