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Combined Effects of Load Factors and Booking Time on Fares: Insights from the Yield Management of a Low-Cost Airline

Author

Listed:
  • Marco Alderighi

    () (University of Valle d’Aosta)

  • Marcella Nicolini

    () (Department of Economics and Business, University of Pavia and Fondazione Eni Enrico Mattei, Milan)

  • Claudio A. Piga

    (Department of Economics, Loughborough University and Rimini Centre Economic Analysis)

Abstract

Based on two strands of theoretical research, this paper provides new evidence on how fares are jointly affected by in-flight seat availability and purchasing date. As capacity-driven theories predict, it emerges that fares monotonically and substantially increase with the flights occupancy rate. Moreover, as suggested in the literature on intertemporal price discrimination, the adoption of advance purchase discounts is widespread as the departure date nears, but it may be part of a U-shaped temporal profile, where discounts are preceded by periods of relatively higher fares. Finally, the intervention of yield management analysts appears to play a substantial role.

Suggested Citation

  • Marco Alderighi & Marcella Nicolini & Claudio A. Piga, 2012. "Combined Effects of Load Factors and Booking Time on Fares: Insights from the Yield Management of a Low-Cost Airline," Quaderni di Dipartimento 171, University of Pavia, Department of Economics and Quantitative Methods.
  • Handle: RePEc:pav:wpaper:171
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    References listed on IDEAS

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    Cited by:

    1. Escobari, Diego & Jindapon, Paan, 2014. "Price discrimination through refund contracts in airlines," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 1-8.
    2. Puller, Steven L. & Taylor, Lisa M., 2012. "Price discrimination by day-of-week of purchase: Evidence from the U.S. airline industry," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 801-812.
    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. Diego Escobari, 2013. "Asymmetric Price Adjustments in Airlines," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(2), pages 74-85, March.
    5. Alderighi, Marco & Gaggero, Alberto A & Piga, Claudio A, 2016. "The hidden side of dynamic pricing in airline markets," MPRA Paper 71674, University Library of Munich, Germany.
    6. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
    7. Beria, Paolo & Bertolin, Alberto, 2019. "Evolving long-distance passenger services. Market concentration, fares and specialisation patterns in Italy," Research in Transportation Economics, Elsevier, vol. 74(C), pages 77-92.
    8. Siegert, Caspar & Ulbricht, Robert, 2020. "Dynamic oligopoly pricing: Evidence from the airline industry," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    9. Diego Escobari & Cristhian Mellado, 2014. "The Choice of Airport, Airline, and Departure Date and Time: Estimating the Demand for Flights," Advances in Airline Economics, in: James Peoples (ed.), The Economics of International Airline Transport, volume 4, pages 177-198, Emerald Publishing Ltd.
    10. Vigren, Andreas, 2016. "Competition in Swedish passenger railway : entry in an open-access market," Working papers in Transport Economics 2016:18, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    11. Varella, Rafael R. & Frazão, Jessica & Oliveira, Alessandro V.M., 2017. "Dynamic pricing and market segmentation responses to low-cost carrier entry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 151-170.

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    More about this item

    Keywords

    Pricing policy; Panel Data; Ryanair; Yield Management.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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