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One of the most basic tools in yield management is overbooking. For any service provider, capacity is perishable. Having an airline seat, restaurant table, or doctor sit idle is expensive so if you cannot be certain that every scheduled passenger, diner, or patient is going to show up, overbooking reduces the chance that capacity goes […]

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For all the faults of its roll out, the Affordable Care Act should ultimately provide more people with health insurance and thus a way to pay for basic health care. That implicitly assumes that there is enough health-care capacity to go around. There is a very real concern that there is not enough capacity — particularly […]

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Overbooking is a basic model in yield management and is always a fun example to do in class. If you are selling tickets to a flight and there is some chance that passengers will be no shows, it is optimal to oversell the flight, i.e., sell more tickets than you have capacity to serve. Model […]

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So we have written a number of things about practices from manufacturing or other service settings could impact the health care industry. Now comes word that the National Science Foundation is funding research on porting ideas from the airline industry to medical clinics (Reducing Health Care Costs, Improving Care, Sept 20, U.S. News & World […]

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The Wall Street Journal remains a reliable source of eye candy, to wit: The article in question (How Airlines Spend Your Airfare, Jun 6) attempts to map to what fraction of costs are covered by what fraction of passengers. Thus with 100 passengers on the flight all paying the same amount, 29% of passengers and hence revenue goes […]

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We have all been there, sitting at an airport gate when the staff cheerfully announces that the flight is oversold and that they are looking for volunteers to takie an alternative flight. The gate agent then announces a series of increasing offers until enough passengers have been bought out. As the graph at right shows, […]

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A study released last week reported that less than half of acute care cases are treated by primary care physicians (A Quarter of Acute Care Delivered in Emergency Department, Sept 7, Hospitalist News). Much of the coverage has centered around what fraction of patients end up at emergency rooms and what fraction are uninsured. The […]

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Airline overbooking — which inevitably leads to bumping some passengers — is one of the classic problems to cover in an operations class.  It comes down to a simple newsvendor problem.  Given a forecasted distribution of how many people will not show up for a flight, the firm has to balance the cost of bumping […]

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