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Advance booking, cancellations, and partial refunds

Author

Listed:
  • Staffan Ringbom

    (Swedish School of Economics and HECER)

  • Oz Shy

    (University of Haifa and Swedish School of Economics)

Abstract

We develop methods for calculating profit-maximizing and socially optimal rates of partial refunds on customers' no-shows and cancellations. We demonstrate how partial refunds can be used to screen consumers according to their different probabilities of cancellation and no-shows. Finally, we show that the socially-optimal rate of partial refund exceeds the equilibrium rate of partial refund.

Suggested Citation

  • Staffan Ringbom & Oz Shy, 2004. "Advance booking, cancellations, and partial refunds," Economics Bulletin, AccessEcon, vol. 13(1), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-04m20001
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    References listed on IDEAS

    as
    1. Pascal Courty & Li Hao, 2000. "Sequential Screening," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 697-717.
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    6. James D. Dana Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Liu, Jian & Mantin, Benny & Wang, Haiyan, 2014. "Supply chain coordination with customer returns and refund-dependent demand," International Journal of Production Economics, Elsevier, vol. 148(C), pages 81-89.
    2. Ringbom, Staffan & Shy, Oz, 2008. "Refunds and collusion in service industries," Journal of Economics and Business, Elsevier, vol. 60(6), pages 502-516.
    3. Oz Shy & Staffan Ringbom, 2005. "Refunds and Collusion," "Marco Fanno" Working Papers 0001, Dipartimento di Scienze Economiche "Marco Fanno".
    4. Cirillo, Cinzia & Bastin, Fabian & Hetrakul, Pratt, 2018. "Dynamic discrete choice model for railway ticket cancellation and exchange decisions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 110(C), pages 137-146.
    5. Akan, Mustafa & Ata, Barış & Dana, James D., 2015. "Revenue management by sequential screening," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 728-774.
    6. Yurong Pei & Mengying Xie & Qiuling Yang & Yi Liao & Yuping Wu, 2021. "Effect of Consumer Strategic Behavior on Online Presale Strategy," Sustainability, MDPI, vol. 13(19), pages 1-21, October.
    7. Guillermo Gallego & Özge Şahin, 2010. "Revenue Management with Partially Refundable Fares," Operations Research, INFORMS, vol. 58(4-part-1), pages 817-833, August.
    8. Xiao Huang & Dan Zhang, 2020. "Service Product Design and Consumer Refund Policies," Marketing Science, INFORMS, vol. 39(2), pages 366-381, March.

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    More about this item

    JEL classification:

    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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