utilization in the U.S. airline industry. We present a simple theoretical model that predicts that lower demand realizations are … associated with higher demand volatility. This prediction is strongly supported by the results of estimating a panel GARCH …This paper studies the relationship between demand uncertainty — the key source of excess capacity — and capacity …

Firms mitigate uncertainty in demand and supply by carrying safety stock, planning for excess capacity and diversifying …. But safety stock and diversification are non-monotonic in demand uncertainty. Our results can be extended to situations in …