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An analysis of destination choice for opaque airline products using multidimensional binary logit models

Listed author(s):
  • Lee, Misuk
  • Khelifa, Alexandre
  • Garrow, Laurie A.
  • Bierlaire, Michel
  • Post, David
Registered author(s):

    We investigate how customers respond to an opaque airline product offered by a European carrier. In this opaque product design, customers are randomly assigned to travel to one of approximately ten destinations; however, for a fee they may exclude one or more destinations from the choice set (or a particular package design) prior to learning which destination they will travel to. We use a multidimensional binary logit model to predict the probability that one or more alternatives will be chosen by a customer. Results show that customers are more likely to pay to exclude destinations located close to the origin airport and destinations that speak the same language as the origin airport. Length of stay, cost of living at the destination, and measures of destination attractiveness are also found to be significant predictors for some package designs. Based on these findings, we offer general recommendations for how to design opaque packages for airline customers.

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    Article provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.

    Volume (Year): 46 (2012)
    Issue (Month): 10 ()
    Pages: 1641-1653

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    Handle: RePEc:eee:transa:v:46:y:2012:i:10:p:1641-1653
    DOI: 10.1016/j.tra.2012.08.009
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    1. Peeta, Srinivas & Paz, Alexander & DeLaurentis, Dan, 2008. "Stated preference analysis of a new very light jet based on-demand air service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(4), pages 629-645, May.
    2. Brey, Raúl & Walker, Joan L., 2011. "Latent temporal preferences: An application to airline travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(9), pages 880-895, November.
    3. Scott Fay, 2004. "Partial-Repeat-Bidding in the Name-Your-Own-Price Channel," Marketing Science, INFORMS, vol. 23(3), pages 407-418, February.
    4. Guillermo Gallego & Robert Phillips, 2004. "Revenue Management of Flexible Products," Manufacturing & Service Operations Management, INFORMS, vol. 6(4), pages 321-337, January.
    5. Chen, Ching-Fu, 2008. "Investigating structural relationships between service quality, perceived value, satisfaction, and behavioral intentions for air passengers: Evidence from Taiwan," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(4), pages 709-717, May.
    6. Tsamboulas, Dimitrios A. & Nikoleris, Anastasios, 2008. "Passengers' willingness to pay for airport ground access time savings," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(10), pages 1274-1282, December.
    7. Lu, Jin-Long & Peeta, Srinivas, 2009. "Analysis of the factors that influence the relationship between business air travel and videoconferencing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(8), pages 709-721, October.
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