278 The UMAP Journal 23.3 (2002) a passenger who arrives two or more hours late is eligible for compen- sation in the amount of double their ticket cost up to $400 Compensation is required only for passengers involuntarily bumped, but common practice is to offer similar amounts to attract volunteers for bump- ing. We assume that 95% of all""passengers are voluntary and we offer them vouchers in place of cash. We calculate that a $1.00 voucher costs the airline $0.82. Incorporating that 5% of bumped passengers receive cash, this plan costs(voucher- value)x0831 per bumped pa assenger Meal Compensation In our software, a passenger in an airport througl particular intervals gets compensation for a meal: 6 A.M. to 9 A.M., break- fast($10); 11 A M. to 1 P. M. lunch($10); 5 P. M. to 8 P. M. dinner($15). This compensation is not mandated, so it serves only as customer service Providing Board A quick survey of airport motels in Kansas City(the hub for Vanguard) showed that $50 is reasonable to cover a motel room along with transportation to and from the motel. Our plan offers overnight accom- modation to a passenger stranded in an airport for at least 6 hrs including midnight who has a flight leaving after 4 A.M. This compensation is not mandated so it serves only as customer service Choosing a Compensation Policy We compare the impacts of the following policies Meal compensation, hotel compensation, and cash Hotel compensation and cash Meal compensation, hotel compensation, and voucher Hotel compensation and voucher Meal compensation and cash Meal compensation and voucher le tabulate penalties for each flight leg and each compensation policy and calculate an optimal number of passengers to book on each flight leg depending on the compensation policy. To ensure that bumping is no more likely than not needing to bump, we impose a maximum booking level of 10/9. We then calculate the expected revenue for each flight leg at the optimal booking level for each policy and rank the policies for each flight leg by expected rever [EDITOR'S NOTE: We omit the authors' extensive tables giving results for specific flights. I An important consideration in choosing a compensation package is cus- tomer service. While there is little short-term impact on revenue from good or bad customer service, there can be significant long-term impact. We should278 The UMAP Journal 23.3 (2002) – A passenger who arrives two or more hours late is eligible for compen￾sation in the amount of double their ticket cost up to $400. Compensation is required only for passengers involuntarily bumped, but common practice is to offer similar amounts to attract volunteers for bump￾ing. We assume that 95% of all “bumped” passengers are voluntary and we offer them vouchers in place of cash. We calculate that a $1.00 voucher costs the airline $0.82. Incorporating that 5% of bumped passengers receive cash, this plan costs (voucher value) × 0.831 per bumped passenger. • Meal CompensationIn our software, a passenger sitting in an airport through particular intervals gets compensation for a meal: 6 a.m. to 9 a.m., break￾fast ($10); 11 a.m. to 1 p.m., lunch ($10); 5 p.m. to 8 p.m., dinner ($15). This compensation is not mandated, so it serves only as customer service. • Providing Board A quick survey of airport motels in Kansas City (the hub for Vanguard) showed that $50 is reasonable to cover a motel room along with transportation to and from the motel. Our plan offers overnight accom￾modation to a passenger stranded in an airport for at least 6 hrs including midnight who has a flight leaving after 4 a.m. This compensation is not mandated, so it serves only as customer service. Choosing a Compensation Policy We compare the impacts of the following policies: • Meal compensation, hotel compensation, and cash • Hotel compensation and cash • Meal compensation, hotel compensation, and voucher • Hotel compensation and voucher • Meal compensation and cash • Meal compensation and voucher We tabulate penalties for each flight leg and each compensation policy and calculate an optimal number of passengers to book on each flight leg depending on the compensation policy. To ensure that bumping is no more likely than not needing to bump, we impose a maximum booking level of 10/9. We then calculate the expected revenue for each flight leg at the optimal booking level for each policy and rank the policies for each flight leg by expected revenue. [EDITOR’S NOTE: We omit the authors’ extensive tables giving results for specific flights.] An important consideration in choosing a compensation package is cus￾tomer service. While there is little short-term impact on revenue from good or bad customer service, there can be significant long-term impact. We should