Title: Probabilistically Optimized Airline Overbooking Strategies, or "Anyone Willing to Take a Later Flight?!"
Authors: Kevin Leder, Saverio Eric Spagnolie, Stefan Wild
Abstract: We develop a series of mathematical models to investigate relationships between overbooking strategies and revenue. Our first models are static, in the sense that passenger behavior is predominantly time-independent; we use a binomial random variable to model consumer behavior. We construct an auction-style model for passenger compensation. Our second set of models is more dynamic, employing Poisson processes for continuous time-dependence on ticket purchasing/cancelling information. Finally, we consider the effects of the post-September 11 market on the industry. We consider a particular company and flight: Frontier Airlines Flight 502. Applying the models to revenue optimization leads to an optimal booking limit of 15% over flight capacity and potentially nets Frontier Airlines an additional $2.7 million/year on Flight 502, given sufficient ticket demand.
Keywords:
Thanks: This work was done for the 2002 International Mathematical Contest in Modeling
Status: Received an "Outstanding" Designation
Appeared in the Journal of Undergraduate Mathematics and Its Applications, Volume 23, Number 3, 2002.
Link: [PDF]
BibTeX:
@inproceedings{KLSSSW02,
    author      = "Kevin Z. Leder and Saverio E. Spagniole and Stefan M. Wild",
    title       = {Probabilistically Optimized Airline Overbooking Strategies, or "Anyone Willing to Take a Later Flight?!"},
    journal     = "Journal of Undergraduate Mathematics and Its Applications",
    year        = "2002",
    volume      = "23",
    number      = "3",
    pages       = "37--338"	
}
	
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