Service Escape: Profiting from Customer Cancellations

@inproceedings{Xie2007ServiceEP,
  title={Service Escape: Profiting from Customer Cancellations},
  author={Jinhong Xie and Eitan Gerstner},
  year={2007}
}
This paper explores the benefits of letting customers escape from prepurchased service contracts by offering refunds for cancellations. We show that such a policy creates opportunities for multiple selling in a capacity-constrained service---i.e., collecting cancellation fees from advance buyers who cancel, and then reselling the freed slots. The better the alternative that motivates a cancellation, the more profitable is a refund-for-cancellations policy compared with a no-refund policy that… CONTINUE READING

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