1. A model of customer bookings based on a deterministic heuristic finds the total number of bookings to accept, b, such that

Group of answer choices

It balances the expected cost of denied service with the potential additional contribution from more sales

b=C/rho,rho, where C is the capacity and rho is the show rate

It does not exceed a certain fraction of total bookings

b=p/D, where p is the fare price and D is the compensation for denied service cost

2. Let s be number of passengers who show up at departure, let p be the price each show pays. If shows exceed capacity, C, the supplier must deny service to s - C customers. Let D be the cost of each customer denied service. The total denied-boarding cost is: 0, if s ? C, and D(s - C), if s > C. The net revenue is given by

Group of answer choices

pC-D max{s-C,0}

ps - D max{s-C, 0}

pC-D(s-C)

ps

3. If a company uses a risk-based policy to set the booking limit, under the assumption that the number of booking requests is independent of the number of no-shows, the booking limit will be increased from b to b+1 if E[R|b] - E[R|b+1] = [1-F(b)]{ G(b-C)D-p}, where F(b) is the probability of booking requests being less than or equal to b, G(b-C) is the probability that the number of no-shows is less than or equal to b-C, and p and D are the price and the cost for denying service, respectively, is:

Group of answer choices

Equal to zero

Positive

A monotonically increasing function of b

Negative

4. To measure the effectiveness of overbooking and manage it companies use performance metrics. One of them is the Revenue Opportunity Metric. This metric measures

Group of answer choices

a and b

The load factor

Denied-boarding rates

Spoilage rate

5. In the airline industry an alternative to overbooking is standbys. A drawback of this alternative is

Group of answer choices

They need to be priced at deep discounts in order to sell

Customers need to be contacted many days in advance

They do not help reduce spoilage

They cannot be denied boarding without compensation