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Capacity-contingent pricing and competition in the airline industry

Author

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  • Clark, Robert
  • Vincent, Nicolas

Abstract

We present evidence on the dynamic pricing strategies of airlines. We collect high-frequency price and load-factor data directly from the websites of the main players for one of the busiest flight corridors in the US. Using this information we characterize the determinants of pricing decisions. Our focus is on the role that competition plays in these decisions. We show that prices for some airlines are responsive to rival prices and load factors. Specifically, we find that even after controlling for the number of days remaining until the flight and the number of seats remaining, some airlines increase their prices as their rivals' available seats disappear.

Suggested Citation

  • Clark, Robert & Vincent, Nicolas, 2012. "Capacity-contingent pricing and competition in the airline industry," Journal of Air Transport Management, Elsevier, vol. 24(C), pages 7-11.
    • Handle: RePEc:eee:jaitra:v:24:y:2012:i:c:p:7-11
    DOI: 10.1016/j.jairtraman.2012.04.005
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    References listed on IDEAS

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    1. Button, Kenneth & Vega, Henry, 2007. "The Uses of the “Temporal-Fares-Offered Curve” in Air Transportation," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 46(2).
    2. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
    3. Boivin, Jean & Clark, Robert & Vincent, Nicolas, 2012. "Virtual borders," Journal of International Economics, Elsevier, vol. 86(2), pages 327-335.
    4. Steven L. Puller & Anirban Sengupta & Steven N. Wiggins, 2009. "Testing Theories of Scarcity Pricing in the Airline Industry," NBER Working Papers 15555, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Jost Daft & Sascha Albers & Sebastian Stabenow, 2021. "From product-oriented flight providers to customer-centric retailers: a dynamic offering framework and implementation guidelines for airlines," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(6), pages 615-625, December.
    2. Alderighi, Marco & Nicolini, Marcella & Piga, Claudio A., 2016. "Targeting leisure and business passengers with unsegmented pricing," Tourism Management, Elsevier, vol. 54(C), pages 502-512.
    3. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2022. "Hidden prices with fixed inventory: Evidence from the airline industry," Transportation Research Part B: Methodological, Elsevier, vol. 157(C), pages 42-61.
    4. Kevin R. Williams, 2017. "Dynamic Airline Pricing and Seat Availability," Cowles Foundation Discussion Papers 2103, Cowles Foundation for Research in Economics, Yale University.
    5. Emel Aktas & Yuwei Meng, 2017. "An Exploration of Big Data Practices in Retail Sector," Logistics, MDPI, vol. 1(2), pages 1-28, December.
    6. Bilotkach, Volodymyr & Gaggero, Alberto A. & Piga, Claudio A., 2015. "Airline pricing under different market conditions: Evidence from European Low-Cost Carriers," Tourism Management, Elsevier, vol. 47(C), pages 152-163.
    7. Ambarish Chandra, 2020. "Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline," Working Papers tecipa-676, University of Toronto, Department of Economics.
    8. Skorupski, Jacek & Wierzbińska, Magdalena, 2015. "A method to evaluate the time of waiting for a late passenger," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 79-89.
    9. Longfei He & Xiao Zhang & Baofeng Huo & Yang Zhang, 2025. "Platform pricing and blockchain adoption for capacity sharing with cross-network externality and supply risk," Annals of Operations Research, Springer, vol. 344(2), pages 793-823, January.
    10. Labake Temitope Adamolugbe & Chijioke Udechukwu Akpudo & Mobolaji Stephen Stephens & Chukwuemeka Albert Enyinda, 2023. "Factors Influencing the Airline Decision-Making Process in Planning Pricing Mechanisms in the Nigerian Aviation Industry," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 752-762, November.
    11. Anshu Agrawal, 2021. "Sustainability of airlines in India with Covid-19: Challenges ahead and possible way-outs," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(4), pages 457-472, August.

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