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


  • 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)


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

    1. Bilotkach, Volodymyr & Gorodnichenko, Yuriy & Talavera, Oleksandr, 2010. "Are airlines' price-setting strategies different?," Journal of Air Transport Management, Elsevier, vol. 16(1), pages 1-6.
    2. Diego Escobari & Li Gan, 2007. "Price Dispersion under Costly Capacity and Demand Uncertainty," NBER Working Papers 13075, National Bureau of Economic Research, Inc.
    3. Alderighi, Marco, 2010. "Fare dispersions in airline markets: A quantitative assessment of theoretical explanations," Journal of Air Transport Management, Elsevier, vol. 16(3), pages 144-150.
    4. Marc Möller & Makoto Watanabe, 2010. "Advance Purchase Discounts Versus Clearance Sales," Economic Journal, Royal Economic Society, vol. 120(547), pages 1125-1148, September.
    5. Alberto A. Gaggero & Claudio A. Piga, 2011. "Airline Market Power and Intertemporal Price Dispersion," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 552-577, December.
    6. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
    7. William N. Evans & Ioannis N. Kessides, 1994. "Living by the "Golden Rule": Multimarket Contact in the U. S. Airline Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 341-366.
    8. Bachis, Enrico & Piga, Claudio A., 2011. "Low-cost airlines and online price dispersion," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 655-667.
    9. Evans, William N & Kessides, Ioannis N, 1993. "Localized Market Power in the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 66-75, February.
    10. Kristopher S. Gerardi & Adam Hale Shapiro, 2009. "Does Competition Reduce Price Dispersion? New Evidence from the Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 1-37, February.
    11. Steven L. Puller & Anirban Sengupta & Steven N. Wiggins, 2009. "Testing Theories of Scarcity Pricing in the Airline Industry," NBER Working Papers 15555, National Bureau of Economic Research, Inc.
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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. Siegert, Caspar & Ulbricht, Robert, 2014. "Dynamic Oligopoly Pricing: Evidence from the Airline Industry," TSE Working Papers 14-478, Toulouse School of Economics (TSE), revised 18 Nov 2015.
    8. 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: The Economics of International Airline Transport, volume 4, pages 177-198 Emerald Publishing Ltd.
    9. 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).

    More about this item


    Pricing policy; Panel Data; Ryanair; Yield Management.;

    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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