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Are airlines' price-setting strategies different?

Author

Listed:
  • Bilotkach, Volodymyr
  • Gorodnichenko, Yuriy
  • Talavera, Oleksandr

Abstract

Using a sample of fare quotes for non-stop travel from New York to London, this paper documents a set of stylized facts about pricing strategies of air carriers on this route. Two key facts stand out. First, airlines appear to employ strikingly different pricing strategies. Second, fares increase at an accelerated rate as the departure date approaches.

Suggested Citation

  • Bilotkach, Volodymyr & Gorodnichenko, Yuriy & Talavera, Oleksandr, 2010. "Are airlines' price-setting strategies different?," Journal of Air Transport Management, Elsevier, vol. 16(1), pages 1-6.
  • Handle: RePEc:eee:jaitra:v:16:y:2010:i:1:p:1-6
    DOI: 10.1016/j.jairtraman.2009.04.004
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    References listed on IDEAS

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    1. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Diego Escobari & Jim Lee, 2014. "Demand uncertainty and capacity utilization in airlines," Empirical Economics, Springer, vol. 47(1), pages 1-19, August.
    2. Raymond Deneckere & James Peck, 2012. "Dynamic Competition With Random Demand and Costless Search: A Theory of Price Posting," Econometrica, Econometric Society, vol. 80(3), pages 1185-1247, May.
    3. Puller, Steven L. & Taylor, Lisa M., 2012. "Price discrimination by day-of-week of purchase: Evidence from the U.S. airline industry," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 801-812.
    4. Melis, Giuseppe & Piga, Claudio A, 2016. "Are all online hotel prices created dynamic? An empirical assessment," MPRA Paper 75896, University Library of Munich, Germany.
    5. repec:eee:touman:v:54:y:2016:i:c:p:502-512 is not listed on IDEAS
    6. Alderighi, Marco & Gaggero, Alberto A & Piga, Claudio A, 2016. "The hidden side of dynamic pricing in airline markets," MPRA Paper 71674, University Library of Munich, Germany.
    7. repec:eee:touman:v:55:y:2016:i:c:p:123-132 is not listed on IDEAS
    8. Escobari, Diego & Rupp, Nicholas & Meskey, Joseph, 2018. "Dynamic Price Discrimination in Airlines," MPRA Paper 88078, University Library of Munich, Germany.
    9. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
    10. Goutam Dutta & Sumitro Santra, 2016. "An exploratory study of price movements along booking profiles in the airline industry in the Indian domestic market," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 9(1), pages 72-88.
    11. repec:eee:transa:v:112:y:2018:i:c:p:46-59 is not listed on IDEAS
    12. Nicolas De Roos & Gordon Mills & Stephen Whelan, 2010. "Pricing Dynamics in the Australian Airline Market," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 545-562, December.
    13. Mumbower, Stacey & Garrow, Laurie A. & Newman, Jeffrey P., 2015. "Investigating airline customers’ premium coach seat purchases and implications for optimal pricing strategies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 73(C), pages 53-69.
    14. Chiou, Yu-Chiun & Liu, Chia-Hsin, 2016. "Advance purchase behaviors of air tickets," Journal of Air Transport Management, Elsevier, vol. 57(C), pages 62-69.
    15. Alderighi, Marco & Gaggero, Alberto A., 2017. "Fly and trade: Evidence from the Italian manufacturing industry," Economics of Transportation, Elsevier, vol. 9(C), pages 51-60.
    16. Dutta, Goutam & Santra, Sumitro, 2015. "Price Movements of the Competing Airlines in the Indian Market: An Empirical Study (A)," IIMA Working Papers WP2015-01-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    17. Marco Alderighi & Marcella Nicolini & Claudio A. Piga, 2012. "Combined Effects of Load Factors and Booking Time on Fares: Insights from the Yield Management of a Low-Cost Airline," Quaderni di Dipartimento 171, University of Pavia, Department of Economics and Quantitative Methods.
    18. Adler, Nicole & Mantin, Benny, 2015. "Government and company contracts: The effect on service and prices in international airline markets," Economics of Transportation, Elsevier, vol. 4(3), pages 166-177.
    19. repec:eee:trapol:v:63:y:2018:i:c:p:80-89 is not listed on IDEAS
    20. Escobari, Diego & Rupp, Nicholas G. & Meskey, Joseph, 2018. "An Analysis of Dynamic Price Discrimination in Airlines," EconStor Open Access Articles, ZBW - German National Library of Economics.
    21. Tomasz Stanisław Szopiński & Robert Nowacki, 2014. "Plane Ticket Price Dispersion in the Online Selling System in Poland," Contemporary Economics, University of Finance and Management in Warsaw, vol. 8(2), June.
    22. Chiou, Yu-Chiun & Liu, Chia-Hsin, 2016. "Advance purchase behaviors of air passengers: A continuous logit model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 474-484.
    23. repec:eee:ecolet:v:164:y:2018:i:c:p:124-127 is not listed on IDEAS
    24. Mantin, Benny & Koo, Bonwoo, 2009. "Dynamic price dispersion in airline markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(6), pages 1020-1029, November.

    More about this item

    Keywords

    Airline industry; Price dynamics; Airline fares;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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