What question did this study set out to answer?

To develop a model for optimizing airline overbooking policies using a sequential decision process.

May 1, 1971

An Airline Overbooking Model

Key Points

To develop a model for optimizing airline overbooking policies using a sequential decision process.
Formulated as a nonhomogeneous Markovian sequential decision process.
Utilized dynamic programming to derive optimal solutions.
Illustrated with airline data to demonstrate the model's sensitivity to parameters.
Optimal policies were derived for overbooking in airline scenarios.
Sensitivity of the model indicated how certain parameters affect booking strategies.

Abstract

A model for determining airline overbooking policies is presented. The problem is formulated as a nonhomogeneous Markovian sequential decision process. Solutions that are optimal in several different senses are obtained with the aid of dynamic programming. An example based upon airline data illustrates the character of the policies and the sensitivity of the model with respect to certain parameters.

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