In this paper, we consider the case that the consumers may cancel their reservations during the booking period so that consumers are divided into two parts: cancellation request and booking request. Simultaneously, we assume that consumers act strategically in booking products. Upon receiving the request, the firm has to decide whether to accept the cancellation request and what fees to charge the booking request in the presence of strategic consumers. We propose optimal price strategy and show the effectiveness of the decision models. We also obtain the optimal control of cancellation demands policy which is achieved by the number of remaining inventory. Numerical experiments are presented to explore the effect of various parameters on the performance of optimal strategy.
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