Low-cost airlines and online price dispersion ☆

Bachis, Enrico; Piga, Claudio A.

doi:10.4324/9781315091617-20

Cited by 6 publications

(9 citation statements)

References 1 publication

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A contextual variable closely linked with competition and suitable for tactical dynamic price strategies is the booking time. Su (2007) and, more recently, Bachis and Piga (2011) show the importance of adjusting prices depending on booking time, in order to segment consumers according to their willingness to pay and their status (i.e. leisure or business customers).…”

Section: Conceptual Frameworkmentioning

confidence: 99%

Strategic and tactical price decisions in hotel revenue management

Abrate

Viglia²

2016

Tourism Management

162

161

View full text Add to dashboard Cite

Dynamic pricing techniques allow using a number of variables in a tactical way compared to standard catalogue prices. This study merges in a conceptual model the relevance of the tactical and the strategic dimension of these variables, classified according to their tangible, reputational or contextual nature.To empirically validate the hypotheses, a database of 21.596 price observations was retrieved from booking.com. The study presents a hedonic price function, using the Shapley-Owen decomposition of the Rsquared to elicit the importance of each group of factors. Further, a hierarchical cluster analysis measures the presence of heterogeneity across operators.The results show that online reputation is gaining importance over the traditional star rating. Despite the tangible variables remain of paramount importance, the findings suggest the relevant role of contextual variables in short-run price variations. The players operating in the tourism and hospitality industries should integrate these findings when designing pricing strategies.

show abstract

Section: Conceptual Frameworkmentioning

confidence: 99%

Strategic and tactical price decisions in hotel revenue management

Abrate

Viglia²

2016

Tourism Management

162

161

View full text Add to dashboard Cite

show abstract

“…Although it has been known that airlines engage in international price discrimination (see, e.g., Bachis and Piga 2011), our analysis is the first to document that airlines charge a substantial premium over average fares for trips originating in their domestic country. Our findings suggest that, despite substantial deregulation of the international airline industry, airlines have a de Jong et al: Domestic Market Power of Airlines higher degree of market power on routes that originate in their domestic country relative to routes that originate in foreign countries.…”

Section: Introductionmentioning

confidence: 85%

“…Although leisure and business travelers may both prefer their domestic airline, the latter are generally assumed to be less price sensitive and therefore might be willing to pay a higher premium. An alternative line of reasoning holds that because of their higher opportunity costs of time, business travelers are less likely to take the effort of searching for lower fares (Bachis and Piga 2011). Finally, business travelers are more likely to be active participants in frequent flier programs and may therefore attach a greater value to the miles of the domestic airline.…”

Section: Discussionmentioning

confidence: 99%

Domestic Market Power in the International Airline Industry

Jong

Behrens

Herk

et al. 2019

Transportation Science

View full text Add to dashboard Cite

We posit and empirically test the hypothesis that airlines are able to charge a fare premium in markets that originate in their domestic country relative to similar markets that originate in foreign countries. To this end, we focus on international one-stop air travel trips for which the main, intercontinental, flight legs are identical, whereas the feeder legs depart from a mixture of domestic and foreign airports. We collect a unique database of published fares for such trips and estimate reduced form fare regressions with main flight leg fixed effects. We find that trips from and to domestic airports (compared with foreign airports) are characterized by approximately 9% higher fares, even after controlling for the competitive environment and a large range of origin characteristics. These findings demonstrate that airlines have substantial domestic market power, enabling them to raise fares at their domestic airports irrespective of aforementioned market conditions. The magnitude of this domestic country premium is large relative to the traditional airport dominance premium, suggesting that the distinction between domestic and foreign origins is a crucial determinant of the degree of market power that airlines can exert in the international airline industry.

show abstract

“…In this case, one-way fares perfectly correlate with round-trip fares. Likewise, Bachis and Piga (2011) explain that European Low-Cost carriers price each segment independently such that the final price of the ticket is just the summation of the prices of each 7. For example, Q = 0.02 is equivalent to two seats sold in a 100-seat aircraft.…”

Section: Figurementioning

confidence: 99%

Separating Between Unobserved Consumer Types: Evidence From Airlines

Escobari

Hernandez

2018

Economic Inquiry

View full text Add to dashboard Cite

We propose an alternative approach to identify unobserved consumer types and assess whether firms price discriminate. Unlike other screening schemes that rely on quantity discounts or product differentiation, in our finite mixture structure individuals have unit demands and the product is homogeneous. We implement the model using an original U.S. airlines data set. The results support the existence of two demand types. The high-type "business" traveler is less price sensitive, has a higher valuation, and pays a higher price than the low type "tourist." The proportion of high types also increases as the departure date nears. (JEL C23, L93, R41)

show abstract

Low-cost airlines and online price dispersion ☆

Cited by 6 publications

References 1 publication

Strategic and tactical price decisions in hotel revenue management

Strategic and tactical price decisions in hotel revenue management

Domestic Market Power in the International Airline Industry

Separating Between Unobserved Consumer Types: Evidence From Airlines

Contact Info

Product

Resources

About