Abstract
As to the problem of reducing and avoiding two kinds of risks of cruise line overbooking, this paper employs the real options approach to construct a cruise line overbooking risk decision model with multiple price classes, incremental cost and nonlinear goodwill loss. We give the steps to gain the best overbooking amount, find the real options connotative in the decision, explain the computing method of the real options included in the decision, and show that the overbooking decision can be regarded as different types of real options. Finally, a numerical example shows the effectiveness and meaning of the decision model.
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