The net benefit of airline overbooking

Benefits of airline overbooking are often measured by considering only the revenue gains attained for overbooked (congested) flights, and ignoring the potential loss of revenues that may take place in other (un-congested) flights (i.e., the ‘gross’ benefit). This study explores the ‘net’ benefit of overbooking by considering revenue implications of overbooking on both congested and un-congested flights. A series of simulation experiments are conducted to investigate the nature of the relationship between the gross and net benefits. The results imply that the net benefit may be substantially lower than the gross benefit under many practical conditions.