Airline Pricing under Different Market Conditions: Evidence from European Low-Cost Carriers
AbstractTraditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 - June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.
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Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 47_11.
Date of creation: Nov 2011
Date of revision:
Easyjet; Intertemporal Pricing; Panel Data; Ryanair; Yield Management;
Other versions of this item:
- Volodymyr Bilotkach & Alberto A. Gaggero & Claudio A. Piga, 2012. "Airline Pricing under Different Market Conditions: evidence from European Low-Cost Carriers," Discussion Paper Series 2012_01, Department of Economics, Loughborough University, revised Jan 2012.
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-28 (All new papers)
- NEP-COM-2011-11-28 (Industrial Competition)
- NEP-EUR-2011-11-28 (Microeconomic European Issues)
- NEP-HME-2011-11-28 (Heterodox Microeconomics)
- NEP-IND-2011-11-28 (Industrial Organization)
- NEP-TUR-2011-11-28 (Tourism Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alberto A. Gaggero & Claudio A. Piga, 2009.
"Airline Market Power and Intertemporal Price Dispersion,"
Discussion Paper Series
2009_10, Department of Economics, Loughborough University, revised Jul 2009.
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