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Recovering costs through price and service differentiation: Accounting for exogenous information on attribute processing strategies in airline choice

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  • Rose, John M.
  • Hensher, David A.
  • Greene, William H.

Abstract

The entry of low cost airlines has thrown out a challenge to all airlines to find ways of attracting passengers, through a mix of fare discounting, greater frequency, improved flight times and no-frill's levels of on-board service. These competitive strategies have an impact on cost recovery. As airlines seek business in an increasingly heterogeneous passenger market, a greater understanding of what matters to potential passengers in choosing an airline grows in importance. Traditional studies of passenger airline choice assume that all attributes matter, but some to a lesser extent. What happens to the empirical evidence on willingness to pay when specific attributes are totally ignored by particular passengers? In this paper, we examine the impact of individual-specific attribute processing strategies (APS) on the inclusion/exclusion of attributes on the parameter estimates and behavioural outputs of models of airline service and fare level choice. Modelling practice assumes that whilst respondents may exhibit preference heterogeneity, they employ a homogenous APS with regards to how they process the presence/absence of attributes of stated choice (SC) experiments. We demonstrate how information collected exogenous of the SC experiment on whether respondents either ignored or considered each attribute of the SC task may be used in the estimation process, and how such information may be used to provide outputs that are attribute processing strategies segment specific.

Suggested Citation

  • Rose, John M. & Hensher, David A. & Greene, William H., 2005. "Recovering costs through price and service differentiation: Accounting for exogenous information on attribute processing strategies in airline choice," Journal of Air Transport Management, Elsevier, vol. 11(6), pages 400-407.
    • Handle: RePEc:eee:jaitra:v:11:y:2005:i:6:p:400-407
    DOI: 10.1016/j.jairtraman.2005.05.005
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    Cited by:

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    10. Doherty, Edel & Campbell, Danny & Hynes, Stephen & van Rensburg, Thomas, 2012. "Labelling effects in discrete choice experiments," Working Papers 148831, National University of Ireland, Galway, Socio-Economic Marine Research Unit.
    11. Collins, Andrew T. & Hess, Stephane & Rose, John M., 2013. "Choice modelling with search and sort data from an interactive choice experiment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 56(C), pages 36-45.
    12. Díaz, Verónica & Montoya, Ricardo & Maldonado, Sebastián, 2023. "Preference estimation under bounded rationality: Identification of attribute non-attendance in stated-choice data using a support vector machines approach," European Journal of Operational Research, Elsevier, vol. 304(2), pages 797-812.
    13. Saffarzadeh, Mahmoud & Mazaheri, Akram & Tari, Majid Zabihi & Seyedabrishami, Seyedehsan, 2016. "Analysis of Iranian passengers' behavior in choosing type of carrier in international air travel to East Asia," Journal of Air Transport Management, Elsevier, vol. 56(PB), pages 123-130.
    14. Joanna Hawlena & Anna Mazurek-Kusiak, 2020. "Determinants of Price Formation for Air Transport Services," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 445-455.
    15. Grigolon, Anna B. & Kemperman, Astrid D.A.M. & Timmermans, Harry J.P., 2012. "The influence of low-fare airlines on vacation choices of students: Results of a stated portfolio choice experiment," Tourism Management, Elsevier, vol. 33(5), pages 1174-1184.
    16. Andrew Collins & John Rose & Stephane Hess, 2012. "Interactive stated choice surveys: a study of air travel behaviour," Transportation, Springer, vol. 39(1), pages 55-79, January.
    17. Sandra Notaro & Maria De Salvo & Roberta Raffaelli, 2022. "Estimating Willingness to Pay for Alpine Pastures: A Discrete Choice Experiment Accounting for Attribute Non-Attendance," Sustainability, MDPI, vol. 14(7), pages 1-15, March.
    18. Balcombe, Kelvin & Fraser, Iain & Harris, Liam, 2009. "Consumer willingness to pay for in-flight service and comfort levels: A choice experiment," Journal of Air Transport Management, Elsevier, vol. 15(5), pages 221-226.
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