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Staffan Ringbom and Oz Shy
''Advance booking, cancellations, and partial refunds''
( 2004, Vol. 13 No.1 )
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.
JEL: M2 - Business Economics: General
L9 - Industry Studies: Transportation and Utilities: General
Manuscript Received : Jan 11 2004 Manuscript Accepted : Jan 20 2004

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