Advanced demand and a critical analysis of revenue management

Abstract

This paper presents a theoretical framework of advanced demand through six propositions. The framework introduces the concept of acquisition and valuation risks and suggests that advanced demand distribution is rooted in the trade off between them. Furthermore, since advanced buyers may not consume, firms may be able to re-sell capacity relinquished. The study then proposes how refunds could provide additional revenue to firms.

The study further suggests theoretical reasons why and when service firms are able to practice revenue management, suggesting that RM tools such as overbooking and demand forecasting may not be the only tools for higher revenue.