IDEAS home Printed from https://ideas.repec.org/a/pal/jorapm/v19y2020i3d10.1057_s41272-019-00210-9.html
   My bibliography  Save this article

Optimal overbooking model for car rental business with two levels of prices having stochastic joint booking and show-up levels

Author

Listed:
  • Naragain Phumchusri

    (Chulalongkorn University)

  • Phatsakorn Sangsukiam

    (Chulalongkorn University)

  • Nannapat Chariyasethapong

    (Chulalongkorn University)

Abstract

Overbooking is a technique in revenue management which offers products or services more than the amount available because there is a possibility that some purchasers may later cancel their purchases. In car rental overbooking problem, overbooking model is complicated because in car rental business, different types of car must be taken into account. This paper presents a mathematical overbooking model for car rental business with two levels of prices in order to find the optimal overbooking levels which minimize the total cost, consisting of opportunity cost, outsourcing cost, and upgrading cost. Booking requests and show-up customers are joint random variables which follow some known joint distributions. Sensitivity analysis is performed to examine the effects of parameters in the overbooking model on the optimal overbooking levels. Due to the complication of the overbooking model, several simplified models are presented as alternative methods for estimating the solutions of the overbooking problem. The results show that the total cost difference between the optimal model and the proposed regression models is in the range of about 3.2–14.09%. The expected total cost when the overbooking policy is implemented is also compared to the total cost when there is no overbooking policy to explore how overbooking decision is significant in minimizing total cost.

Suggested Citation

  • Naragain Phumchusri & Phatsakorn Sangsukiam & Nannapat Chariyasethapong, 2020. "Optimal overbooking model for car rental business with two levels of prices having stochastic joint booking and show-up levels," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(3), pages 190-209, June.
    • Handle: RePEc:pal:jorapm:v:19:y:2020:i:3:d:10.1057_s41272-019-00210-9
    DOI: 10.1057/s41272-019-00210-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41272-019-00210-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41272-019-00210-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chevalier, Philippe & Lamas, Alejandro & Lu, Liang & Mlinar, Tanja, 2015. "Revenue management for operations with urgent orders," European Journal of Operational Research, Elsevier, vol. 240(2), pages 476-487.
    2. Barry C. Smith & John F. Leimkuhler & Ross M. Darrow, 1992. "Yield Management at American Airlines," Interfaces, INFORMS, vol. 22(1), pages 8-31, February.
    3. Koide, Takeshi & Ishii, Hiroaki, 2005. "The hotel yield management with two types of room prices, overbooking and cancellations," International Journal of Production Economics, Elsevier, vol. 93(1), pages 417-428, January.
    4. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    5. William J. Carroll & Richard C. Grimes, 1995. "Evolutionary Change in Product Management: Experiences in the Car Rental Industry," Interfaces, INFORMS, vol. 25(5), pages 84-104, October.
    6. Li, Dong & Pang, Zhan, 2017. "Dynamic booking control for car rental revenue management: A decomposition approach," European Journal of Operational Research, Elsevier, vol. 256(3), pages 850-867.
    7. Sierag, D.D. & Koole, G.M. & van der Mei, R.D. & van der Rest, J.I. & Zwart, B., 2015. "Revenue management under customer choice behaviour with cancellations and overbooking," European Journal of Operational Research, Elsevier, vol. 246(1), pages 170-185.
    8. Oliveira, Beatriz Brito & Carravilla, Maria Antónia & Oliveira, José Fernando, 2017. "Fleet and revenue management in car rental companies: A literature review and an integrated conceptual framework," Omega, Elsevier, vol. 71(C), pages 11-26.
    9. Suzuki, Yoshinori, 2006. "The net benefit of airline overbooking," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(1), pages 1-19, January.
    10. Lazov, Igor, 2017. "Profit management of car rental companies," European Journal of Operational Research, Elsevier, vol. 258(1), pages 307-314.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Dong Li & Zhan Pang & Lixian Qian, 2023. "Bid price controls for car rental network revenue management," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 261-282, January.
    3. Ma, Jie & Tse, Ying Kei & Wang, Xiaojun & Zhang, Minhao, 2019. "Examining customer perception and behaviour through social media research – An empirical study of the United Airlines overbooking crisis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 192-205.
    4. J Pinder, 2005. "Using revenue management to improve pricing and capacity management in programme management," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(1), pages 75-87, January.
    5. 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.
    6. Dai Yao & Chuang Tang & Junhong Chu, 2023. "A Dynamic Model of Owner Acceptance in Peer-to-Peer Sharing Markets," Marketing Science, INFORMS, vol. 42(1), pages 166-188, January.
    7. C.K. Anderson & M. Davison & H. Rasmussen, 2004. "Revenue management: A real options approach," Naval Research Logistics (NRL), John Wiley & Sons, vol. 51(5), pages 686-703, August.
    8. Itir Karaesmen & Garrett van Ryzin, 2004. "Overbooking with Substitutable Inventory Classes," Operations Research, INFORMS, vol. 52(1), pages 83-104, February.
    9. Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
    10. Yu, Yugang & Dong, Yuxuan & Guo, Xiaolong, 2018. "Pricing for sales and per-use rental services with vertical differentiation," European Journal of Operational Research, Elsevier, vol. 270(2), pages 586-598.
    11. Ali Hortaçsu & Olivia R. Natan & Hayden Parsley & Timothy Schwieg & Kevin R. Williams, 2021. "Organizational Structure and Pricing: Evidence from a Large U.S. Airline," NBER Working Papers 29508, National Bureau of Economic Research, Inc.
    12. Chen, Lijian, 2020. "Determine the cost of denying boarding to passengers: An optimization-based approach," International Journal of Production Economics, Elsevier, vol. 220(C).
    13. Feng, Youyi & Xiao, Baichun, 2006. "A continuous-time seat control model for single-leg flights with no-shows and optimal overbooking upper bound," European Journal of Operational Research, Elsevier, vol. 174(2), pages 1298-1316, October.
    14. Benjamin Marcus & Chris K. Anderson, 2006. "Online Low-Price Guarantees---A Real Options Analysis," Operations Research, INFORMS, vol. 54(6), pages 1041-1050, December.
    15. Irene Ng & Nick K.T. Yip, 2009. "Mechanism design in an integrated approach towards revenue management: the case of Empress Cruise Lines," The Service Industries Journal, Taylor & Francis Journals, vol. 31(3), pages 469-482, February.
    16. Barut, M. & Sridharan, V, 2004. "Design and evaluation of a dynamic capacity apportionment procedure," European Journal of Operational Research, Elsevier, vol. 155(1), pages 112-133, May.
    17. Alavi Fard, Farzad & Sy, Malick & Ivanov, Dmitry, 2019. "Optimal overbooking strategies in the airlines using dynamic programming approach in continuous time," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 384-399.
    18. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    19. Saito, Taiga & Takahashi, Akihiko & Koide, Noriaki & Ichifuji, Yu, 2019. "Application of online booking data to hotel revenue management," International Journal of Information Management, Elsevier, vol. 46(C), pages 37-53.
    20. Richard Metters & Carrie Queenan & Mark Ferguson & Laura Harrison & Jon Higbie & Stan Ward & Bruce Barfield & Tammy Farley & H. Ahmet Kuyumcu & Amar Duggasani, 2008. "The “Killer Application” of Revenue Management: Harrah's Cherokee Casino & Hotel," Interfaces, INFORMS, vol. 38(3), pages 161-175, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jorapm:v:19:y:2020:i:3:d:10.1057_s41272-019-00210-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.