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Low–cost pricing strategies in leasure markets

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  • Paolo Malighetti

    ()

  • Renato Redondi

    ()

  • Andrea Salanti

    ()

Abstract

The practice of dynamic pricing, so typical of low cost carriers, is generally regarded as a form of price discrimination between "leisure" and "business" travellers on the single flight or on the single route. Across different routes, however, things may go differently. If price increases in the last 15 days prior to departure are meant to discriminate business demand, leisure demand should account for earlier price variations. Working on a database including the daily fare over the 3 months prior to each flights operated by easyJet during 2009, we assign to each route its own "leisure index", defined as the difference between the rate of price change during the ninety days prior to departure and the one during the last 15 days. Empirical results can be summarized by saying that "business" routes have lower average prices per kilometre, while "leisure" routes show a less dynamic price behaviour, with higher minimum prices and lower maximum prices per kilometre.

Suggested Citation

  • Paolo Malighetti & Renato Redondi & Andrea Salanti, 2010. "Low–cost pricing strategies in leasure markets," Working Papers 1007, Department of Economics and Technology Management, University of Bergamo.
  • Handle: RePEc:brh:wpaper:1007
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    File URL: http://hdl.handle.net/10446/705
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    References listed on IDEAS

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    7. Malighetti, Paolo & Paleari, Stefano & Redondi, Renato, 2009. "Pricing strategies of low-cost airlines: The Ryanair case study," Journal of Air Transport Management, Elsevier, vol. 15(4), pages 195-203.
    8. repec:eee:touman:v:31:y:2010:i:1:p:36-44 is not listed on IDEAS
    9. James D. Dana Jr., 1999. "Equilibrium Price Dispersion Under Demand Uncertainty: The Roles of Costly Capacity and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 632-660, Winter.
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    Citations

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    Cited by:

    1. 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.
    2. repec:eee:touman:v:47:y:2015:i:c:p:152-163 is not listed on IDEAS
    3. Melis, Giuseppe & Piga, Claudio A, 2016. "Are all online hotel prices created dynamic? An empirical assessment," MPRA Paper 75896, University Library of Munich, Germany.
    4. Domínguez-Menchero, J. Santos & Rivera, Javier & Torres-Manzanera, Emilio, 2014. "Optimal purchase timing in the airline market," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 137-143.
    5. Cirer-Costa, Joan Carles, 2017. "Estrategias de fijación y ofuscación de precios en los hoteles de sol y playa
      [Pricing and obfuscation strategies for sun and beach hotels]
      ," MPRA Paper 81823, University Library of Munich, Germany.
    6. repec:eee:touman:v:54:y:2016:i:c:p:502-512 is not listed on IDEAS
    7. Cattaneo, Mattia & Malighetti, Paolo & Morlotti, Chiara & Redondi, Renato, 2016. "Quantity price discrimination in the air transport industry: The easyJet case," Journal of Air Transport Management, Elsevier, vol. 54(C), pages 1-8.
    8. Malighetti, Paolo & Redondi, Renato & Salanti, Andrea, 2014. "Competitive vs. monopolistic routes: Are fares so different?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 3-8.
    9. repec:eee:jaitra:v:64:y:2017:i:pa:p:91-99 is not listed on IDEAS
    10. 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.
    11. Moreno, Luis & Ramon, Ana & Pedreño, Andrés, 2015. "The Development of Low-cost Airlines and Tourism as a Competitiveness Complementor: Effects, Evolution and Strategies," Journal of Spatial and Organizational Dynamics, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, vol. 3(4), pages 262-274.
    12. Beria, Paolo & Grimaldi, Raffaele & Debernardi, Andrea & Ferrara, Emanuele & Laurino, Antonio, 2014. "Spatial and scenario analyses of long distance coach transport in Italy," MPRA Paper 54739, University Library of Munich, Germany.
    13. repec:eee:touman:v:61:y:2017:i:c:p:23-34 is not listed on IDEAS

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