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The determinants of hidden-city ticketing: Competition, hub-and-spoke networks, and advance-purchase requirements

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  • Gaggero, Alberto A.
  • Luttmann, Alexander

Abstract

We offer a comprehensive empirical study on hidden-city ticketing (HCT), a pricing phenomenon in the airline industry that occurs when the fare for a nonstop trip from A to B is more expensive than a connecting trip from A to B and B to C. Exploiting a unique panel of over 473 thousand fares for flights departing between October 1st, 2019 and December 31st, 2019, we find that HCT depends on route competition (both on A–B and A–C routes), largely occurs in the last week to departure, is less likely when airport C is a hub, and primarily occurs on carriers that operate large hub-and-spoke networks (e.g., American, Delta, and United).

Suggested Citation

  • Gaggero, Alberto A. & Luttmann, Alexander, 2023. "The determinants of hidden-city ticketing: Competition, hub-and-spoke networks, and advance-purchase requirements," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 173(C).
    • Handle: RePEc:eee:transe:v:173:y:2023:i:c:s1366554523000741
    DOI: 10.1016/j.tre.2023.103086
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    Cited by:

    1. Sun, Xiaoqian & Wandelt, Sebastian & Zhang, Anming, 2023. "Price discrimination through hidden city options? A data-driven study on the extent and evolution of skiplaggability in the global aviation system," Journal of Air Transport Management, Elsevier, vol. 108(C).
    2. Brad Shrago, 2024. "The Spirit Effect: Ultra-Low Cost Carriers and Fare Dispersion in the U.S. Airline Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(4), pages 549-579, June.

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    More about this item

    Keywords

    Advance-purchase; Airline pricing; Competition; Hidden-city ticketing; Hub airports; Price discrimination;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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