Advance Booking, Reservations and Refunds

We investigate economic and strategic incentives of service providers to engage in advance booking while allowing for a full-refund for those customers who cancel or do not show up at the time when the good or the service is provided. We show that from social welfare and industry profit point of views, the fullrefund booking strategy dominates the no-refund booking strategy. We also show that the full-refund booking strategy yields lower profit and social welfare than a market segmentation where different consumers buy tickets with different refundability options. None of the strategies are Pareto dominating any other