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Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline
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-based theories predict, it emerges that fares monotonically and substantially increase with flight occupancy. After controlling for capacity utilization, our analysis also supports time-based theories, indicating a U-shaped temporal profile over a two-month booking period, as well as a sharp increase in fares in the two weeks prior to departure.
| Acceptance Date | Feb 13, 2014 |
|---|---|
| Publication Date | Sep 28, 2015 |
| Journal | Review of Economics and Statistics |
| Print ISSN | 0034-6535 |
| Publisher | Massachusetts Institute of Technology Press |
| Pages | 900-915 |
| DOI | https://doi.org/10.1162/REST_a_00451 |
| Keywords | pricing policy, panel data, Ryanair, yield management |
| Publisher URL | https://doi.org/10.1162/REST_a_00451 |
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