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Pricing Practices of Resellers in the Airline Industry: Posted Price vs. Name‐Your‐Own‐Price Models

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  • Esther Gal‐Or

Abstract

I find that when a reseller with market power serves an airline company and only linear contracts are feasible, the airline prefers that the reseller utilizes the Name‐Your‐Own‐Price (NYOP) (a la Priceline) instead of the Posted Price (PP) (a la Hotwire) model. Essentially, the airline can better extract the surplus of the reseller if power over pricing is in the hands of numerous consumers, each bidding according to her preferences, instead of being concentrated in the hands of the reseller. Introducing two part tariff contracts or competition among resellers eliminates the distinction between the two pricing models. Either form of pricing generates the same outcome as vertical integration of the airline with the downstream market of resellers.

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  • Esther Gal‐Or, 2011. "Pricing Practices of Resellers in the Airline Industry: Posted Price vs. Name‐Your‐Own‐Price Models," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 43-82, March.
    • Handle: RePEc:bla:jemstr:v:20:y:2011:i:1:p:43-82
    DOI: 10.1111/j.1530-9134.2010.00283.x
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    Cited by:

    1. Rachel R. Chen & Esther Gal-Or & Paolo Roma, 2014. "Opaque Distribution Channels for Competing Service Providers: Posted Price vs. Name-Your-Own-Price Mechanisms," Operations Research, INFORMS, vol. 62(4), pages 733-750, August.
    2. Barbara Gaudenzi & Alessandro Bucciol, 2016. "Jet fuel price variations and market value: a focus on low-cost and regular airline companies," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(6), pages 977-991, November.
    3. Feng, Bo & Mao, Zhaofang & Li, Hui, 2021. "Choices for competing service providers with heterogeneous customers: Traditional versus opaque sales modes," Omega, Elsevier, vol. 98(C).
    4. Bender, Mark & Gal-Or, Esther & Geylani, Tansev, 2019. "Crowdfunding As a Vehicle for Raising Capital and for Price Discrimination," Journal of Interactive Marketing, Elsevier, vol. 46(C), pages 1-19.

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