Overbooking: A Sacred Cow Ripe for Slaughter?

By Richard Klophaus & Stefan Pölt

This paper examines the economic rationale behind Ryanair’s no-overbooking policy by using a simple overbooking model that describes the number of surviving bookings as a binomial process. The resulting decision rule allows determining a booking limit on the number of reservations based on empirical data on yields, variable costs, costs per denied boarding and no-show probabilities.
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