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

Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline Thumbnail


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
Publicly Available Date Mar 29, 2024
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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