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Efficiency considerations in airline pricing and yield management


  • Botimer, Theodore C.


Consumers and their advocates routinely criticize the practices of price discrimination and yield management. To date, the benefits to consumers of applying revenue management techniques have not been clearly identified. This research assesses airline revenue management techniques on the basis of economic efficiency. This paper demonstrates that a differentiated fare product structure with a range of price levels coupled with effective yield management techniques can provide airline seats to those consumers who value them most when demand exceeds supply. Efficiency in the allocation of limited airline seat inventories can be achieved in the current industry environment, making both society and airlines better off.

Suggested Citation

  • Botimer, Theodore C., 1996. "Efficiency considerations in airline pricing and yield management," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(4), pages 307-317, July.
  • Handle: RePEc:eee:transa:v:30:y:1996:i:4:p:307-317

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    References listed on IDEAS

    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, July.
    2. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
    3. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter.
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    Cited by:

    1. Obeng, K., 2008. "Airline daily fare differentiation in a medium-size travel market," Journal of Air Transport Management, Elsevier, vol. 14(4), pages 168-174.
    2. Moreno-Izquierdo, L. & Ramón-Rodríguez, A. & Perles Ribes, J., 2015. "The impact of the internet on the pricing strategies of the European low cost airlines," European Journal of Operational Research, Elsevier, vol. 246(2), pages 651-660.
    3. Barut, M. & Sridharan, V, 2004. "Design and evaluation of a dynamic capacity apportionment procedure," European Journal of Operational Research, Elsevier, vol. 155(1), pages 112-133, May.
    4. Wong, Jinn-Tsai, 1997. "Basic concepts for a system for advance booking for highway use," Transport Policy, Elsevier, vol. 4(2), pages 109-114, April.

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