A good overbooking strategy should ________.
A) minimize the expected opportunity cost of idle service capacity
B) balance the expected opportunity cost of idle service capacity and expected cost of turning away customers who have reservations
C) minimize the expected cost of turning away reservations
D) none of the above; services should try to avoid overbooking

Question

Quizplus · Accepted Answer

A good overbooking strategy should balance the expected opportunity cost of idle service capacity and the expected cost of turning away customers who have reservations. It is not always possible to avoid overbooking, as no-show rates and cancellations can vary. However, the strategy should aim to minimize potential losses while still accommodating as many customers as possible.

A Good Overbooking Strategy Should ________