Application of Heuristics to Revenue Management System Override Decision-Making

Abstract

Although revenue management studies suggest heuristics are applied when overriding revenue management system (RMS) recommendations, research has yet to explore the frequently used heuristics and their effects on hotel performance. This study first employed qualitative techniques to ascertain the frequently used heuristics—anchoring and overconfidence—in RMS overrides, and the reasons behind their prevalence. It then applied quantitative techniques to examine the effects of these heuristics on hotel performance, leveraging the insights from the qualitative findings to offer a nuanced understanding of the relationships. The qualitative insights reveal that anchoring is frequently used mainly because of the belief that the system can learn from the overrides. In contrast, the frequent use of overconfidence arises from the lack of transparency and trust in the RMSs' algorithms. The quantitative results indicate that overconfidence has a significant negative direct effect on performance, while the positive relationship between anchoring and performance is mediated by RMS override effectiveness.

Keywords

anchoring overconfidence human-system interaction system overrides judgmental decision-making behavioral economics

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