Allocation of Air Cargo Capacity to Decentralized Sales Agents

A global airline has cargo operations in multiple nations and locations. In this paper, we study optimal policies for managing sales agents. At present, for each flight, headquarters retains a portion of the total capacity and allocates the rest to sales agents. Capacity retained by the headquarters is used only after the allocated capacity is exhausted. While each agent is allowed to use any policy to fill the capacity allocated to him, the capacity retained by the headquarters is allocated based on a control policy. In this talk, we present the policies being employed by the airline and discuss the underlying optimization problem. Assuming that each agent is a risk averse agent whose effort level determines the demand rates, we then analyze a set of alternate policies that try to maximize expected revenues for the airlines and check the optimality of the current policy.