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The economic value of using advance booking of orders

Author

Listed:
  • Weatherford, LR
  • Pfeifer, PE

Abstract

The advance booking of orders (ABO) is the practice of selling units of an item (either products or services) in advance of the actual availability of the item. We consider the question of whether or not advance bookings should be offered. Closed-form analytical results are derived for the expected profits for the classic single-period inventory (newsboy) problem both with and without advance bookings. These two profit expressions allow us to quantify the benefits of ABO. The benefits include both the yield-management benefits associated with the stimulation of demand and the planning and control benefits of using advance booking as a leading indicator of total demand.

Suggested Citation

  • Weatherford, LR & Pfeifer, PE, 1994. "The economic value of using advance booking of orders," Omega, Elsevier, vol. 22(1), pages 105-111, January.
    • Handle: RePEc:eee:jomega:v:22:y:1994:i:1:p:105-111
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    Citations

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    Cited by:

    1. Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
    2. Oded Koenigsberg & Eitan Muller & Naufel Vilcassim, 2008. "easyJet® pricing strategy: Should low-fare airlines offer last-minute deals?," Quantitative Marketing and Economics (QME), Springer, vol. 6(3), pages 279-297, September.
    3. Chen, Liang-Hsuan & Chen, Ying-Che, 2010. "A multiple-item budget-constraint newsboy problem with a reservation policy," Omega, Elsevier, vol. 38(6), pages 431-439, December.
    4. Mesak, Hani I. & Zhang, Hongkai & Pullis, Joe M., 2010. "On optimal service capacity allocation policy in an advance selling environment in continuous time," European Journal of Operational Research, Elsevier, vol. 203(2), pages 505-512, June.
    5. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    6. Herbon, Avi & Hadas, Yuval, 2015. "Determining optimal frequency and vehicle capacity for public transit routes: A generalized newsvendor model," Transportation Research Part B: Methodological, Elsevier, vol. 71(C), pages 85-99.
    7. Alfares, Hesham K. & Elmorra, Hassan H., 2005. "The distribution-free newsboy problem: Extensions to the shortage penalty case," International Journal of Production Economics, Elsevier, vol. 93(1), pages 465-477, January.
    8. Khouja, Moutaz, 2001. "The effect of large order quantities on expected profit in the single-period model," International Journal of Production Economics, Elsevier, vol. 72(3), pages 227-235, August.
    9. Khouja, Moutaz & Robbins, Stephanie S., 2003. "Linking advertising and quantity decisions in the single-period inventory model," International Journal of Production Economics, Elsevier, vol. 86(2), pages 93-105, November.
    10. Ku, Cheng-Yuan & Chang, Yi-Wen, 2012. "Optimal production and selling policies with fixed-price contracts and contingent-price offers," International Journal of Production Economics, Elsevier, vol. 137(1), pages 94-101.
    11. Khouja, Moutaz J., 2000. "Optimal ordering, discounting, and pricing in the single-period problem," International Journal of Production Economics, Elsevier, vol. 65(2), pages 201-216, April.
    12. Xi Wang & Xu Guan & Zelong Yi, 2019. "Roles of a preselling strategy under asymmetric information," Marketing Letters, Springer, vol. 30(1), pages 91-105, March.
    13. Moussawi-Haidar, Lama, 2014. "Optimal solution for a cargo revenue management problem with allotment and spot arrivals," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 72(C), pages 173-191.

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