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Overbooking under dynamic and static policies

Author

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  • Wei Wang

    (PROS Inc.)

  • Darius Walczak

    (PROS Inc.)

Abstract

Overbooking, no-shows and cancellations are important aspects of revenue management with published research going back several decades. Yet, despite availability of a variety of theoretical models including dynamic ones, in practice, airlines today are still applying relatively simplistic static solutions. We analyze underlying reasons for this situation and investigate potential benefits as complexity of the solution method increases. We present a comparison of modeling overbooking for no-shows and cancellations using dynamic and static policies, and also analyze impact of the refund as well as denied boarding cost structures.

Suggested Citation

  • Wei Wang & Darius Walczak, 2016. "Overbooking under dynamic and static policies," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(6), pages 534-553, December.
    • Handle: RePEc:pal:jorapm:v:15:y:2016:i:6:d:10.1057_rpm.2016.34
    DOI: 10.1057/rpm.2016.34
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    References listed on IDEAS

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    1. Alstrup, Jens & Boas, Soren & Madsen, Oli B. G. & Vidal, ReneVictor Valqui, 1986. "Booking policy for flights with two types of passengers," European Journal of Operational Research, Elsevier, vol. 27(3), pages 274-288, December.
    2. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    3. Janakiram Subramanian & Shaler Stidham & Conrad J. Lautenbacher, 1999. "Airline Yield Management with Overbooking, Cancellations, and No-Shows," Transportation Science, INFORMS, vol. 33(2), pages 147-167, May.
    4. Barry C. Smith & John F. Leimkuhler & Ross M. Darrow, 1992. "Yield Management at American Airlines," Interfaces, INFORMS, vol. 22(1), pages 8-31, February.
    5. Richard E. Chatwin, 1999. "Continuous-Time Airline Overbooking with Time-Dependent Fares and Refunds," Transportation Science, INFORMS, vol. 33(2), pages 182-191, May.
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    Cited by:

    1. Robert Hjorth & Thomas Fiig & Jesper Larsen & Nicolas Bondoux, 2018. "Joint overbooking and seat allocation for fare families," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(6), pages 436-452, December.
    2. Klein, Robert & Koch, Sebastian & Steinhardt, Claudius & Strauss, Arne K., 2020. "A review of revenue management: Recent generalizations and advances in industry applications," European Journal of Operational Research, Elsevier, vol. 284(2), pages 397-412.

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