Institute of Transportation, MOTC

        Overbooking is one of the revenue management strategies for airlines. However, overbooking may result in denied boarding, the compensation costs of airline s and passengers will not be satisf ied with the airline’s service. The previous literature of denied boarding mostly discussed the optimal overbooking strategies fromthe perspective of airlines, the impacts of denied boarding on service satisfaction, and there’s no literature on travelers’ willingness to accept for denied boarding and willingness to pay to avoid denied boarding . However, the results of willingness to pay and willingness to accept for denied boarding can be used by airlines as a basis when denied boarding to avoid excessive costs and keep passengers satisf ied, also be used as a new pricing strateg y . The stated preference questionnaire is designed to analyze passengers' prefe rence f or denied boarding compensation and the willingness to pay to avoid denied boarding in different situations. The  multinomial logit model is estimated , this study also appl ies latent class logit model to analyze the
heterogeneity of passengers . Furth ermore, we quantify the passengers’ willingness to pay and willingness to accept for denied boarding . Our results show that in the multinomial logit model, there is a significant difference in willingness to pay and willingness to accept for denied boardin g between full se rvice and low cost carriers, outbound and inbound, direct flight and the first part of connecting flight, etc. I n latent class logit model, one of the two groups comprises passengers who are lower income. For p asse ngers with lower income, there is no significant difference in willingness to pay and willingness to accept for denied boarding between full service and low cost carriers, outbound and inbound , also they are more sensitive to additional cost D enied boarding occurs in the case of low cost carrier, inbound, direct flight and fail to tell passengers at the c heck in counter, lower income passe ngers’ willingness to pay is 26% of the fare, willingness to accept is 27% of the fare; higher income passe ngers’ willingness to pay is 106% of the fare, willingness to accept is 63% of the fare weighted average by sample’s income, the median willingness to pay is 79% of the fare and the median willingness to accept is 51% of the fare; taking into account the fare and weighted average by
income, the median willingness to pay is 4936(NTD) and the median willingness to accept is 3246(NTD).