Refundable Advance Purchase Tickets and Advance Purchase Restrictions under Aggregate Demand Uncertainty
28 Pages Posted: 25 Nov 2009
Date Written: May 2009
Abstract
This paper rationalizes the use of discounted refundable advance purchase tickets and advance purchase restrictions in context of models with costly capacity and aggregate demand uncertainty. We show how a monopolist on such markets can improve upon pricing mechanisms, previously proposed in the related literature for markets for perishable products, characterized by uncertain demand and costly capacity (which include but are not limited to such important industries as airlines, hotels, restaurants, car rentals, and live performances). Our model provides a simple link between two strains of literature (one modeling non-refundable discounted tickets with demand uncertainty specified through states of demand, and the other analyzing fully or partially refundable contracts while treating demand uncertainty at the customer level).
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