In many markets we observe that sellers sell more than their capacity (overbooking). In this paper we show when overbooking is a profitable strategy and compare different compensation schemes that we observe in the data. A crucial factor is whether demand is uncertain. In that case, overbooking allows firms to respond to realized demand rather than expected demand. When demand is uncertain, we find that compensations schemes based on an auction (as airline companies in the US do) are superior to fixed compensation schemes (as in the EU).