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Pricing strategies by European traditional and low cost airlines. Or, when is it the best time to book on line?

It is often assumed that the airlines’ fares increase monotonically over time, peaking a few days before the departure. Using fares for about 650 thousand flights operated by both Low-Cost and Full Service Carriers, we show several instances in which the monotonic property does not hold. We also show that the volatility of fares increase in the last four weeks before departure, which is the period when the airlines can formulate a better prediction for a flight’s load factor. Finally, especially within the last two weeks, Full Service Carriers may offer lower fares than those posted by Low Cost Carriers.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Book_chapter.pdf
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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2006_14.

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Date of creation: Jul 2006
Date of revision: Jul 2006
Handle: RePEc:lbo:lbowps:2006_14
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Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
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  1. Gale, Ian L & Holmes, Thomas J, 1993. "Advance-Purchase Discounts and Monopoly Allocation of Capacity," American Economic Review, American Economic Association, vol. 83(1), pages 135-46, March.
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  5. James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
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  7. Gale, Ian L. & Holmes, Thomas J., 1992. "The efficiency of advance-purchase discounts in the presence of aggregate demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 413-437, September.
  8. Eric K. Clemons & Il-Horn Hann & Lorin M. Hitt, 2002. "Price Dispersion and Differentiation in Online Travel: An Empirical Investigation," Management Science, INFORMS, vol. 48(4), pages 534-549, April.
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  10. Shon, Zheng-Yi & Chen, Fang-Yuan & Chang, Yu-Hern, 2003. "Airline e-commerce: the revolution in ticketing channels," Journal of Air Transport Management, Elsevier, vol. 9(5), pages 325-331.
  11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  12. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Persistent Price Dispersion in Online Markets," Working Papers 2006-12, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  13. Giaume, Stephanie & Guillou, Sarah, 2004. "Price discrimination and concentration in European airline markets," Journal of Air Transport Management, Elsevier, vol. 10(5), pages 305-310.
  14. Kathy J. Hayes & Leola B. Ross, 1998. "Is Airline Price Dispersion the Result of Careful Planning or Competitive Forces?," Review of Industrial Organization, Springer, vol. 13(5), pages 523-541, October.
  15. Glenn Ellison & Sara Fisher Ellison, 2005. "Lessons About Markets from the Internet," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 139-158, Spring.
  16. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Temporal Price Dispersion: Evidence from an Online Consumer Electronics Market," Working Papers 2004-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  17. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
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