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Airline overbooking models with misspecification

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  • Amaruchkul, Kannapha
  • Sae-Lim, Patipan

Abstract

This paper looks at static overbooking models. In theory, a random show demand follows a binomial distribution with each reservation showing up independently and with the same probability. However, in practice, some overbooking models assume that the show demand is the product of the overbooking level and the random show-up rate. The decision model embedded in a commercial revenue management system is misspecified. We explore the consequences of the modeling error and find that the performance of the model with misspecification decreases as show-up probability decreases. Among our three choices of show-up rate distributions, normal, beta and deterministic, the beta model performs best. We also identify situations in which an airline might prefer the deterministic model to the normal model.

Suggested Citation

  • Amaruchkul, Kannapha & Sae-Lim, Patipan, 2011. "Airline overbooking models with misspecification," Journal of Air Transport Management, Elsevier, vol. 17(2), pages 143-147.
    • Handle: RePEc:eee:jaitra:v:17:y:2011:i:2:p:143-147
    DOI: 10.1016/j.jairtraman.2010.06.003
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    References listed on IDEAS

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    1. Barry C. Smith & John F. Leimkuhler & Ross M. Darrow, 1992. "Yield Management at American Airlines," Interfaces, INFORMS, vol. 22(1), pages 8-31, February.
    2. Luo, Sirong & Çakany?ld?r?m, Metin & Kasilingam, Raja G., 2009. "Two-dimensional cargo overbooking models," European Journal of Operational Research, Elsevier, vol. 197(3), pages 862-883, September.
    3. Andreea Popescu & Pinar Keskinocak & Ellis Johnson & Mariana LaDue & Raja Kasilingam, 2006. "Estimating Air-Cargo Overbooking Based on a Discrete Show-Up-Rate Distribution," Interfaces, INFORMS, vol. 36(3), pages 248-258, June.
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    Cited by:

    1. Fukui, Hideki & Nagata, Koki, 2020. "How do passengers react to airlines’ overbooking strategies? Evidence from the US airlines," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 242-255.
    2. Guo, Xiaolong & Dong, Yufeng & Ling, Liuyi, 2016. "Customer perspective on overbooking: The failure of customers to enjoy their reserved services, accidental or intended?," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 65-72.

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