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Impacts of yield management in competitive airline markets

Author

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  • Belobaba, Peter P.
  • Wilson, John L.

Abstract

This paper presents the results of the first known study of the impacts of airline yield management (YM) under competitive market conditions, taking into account the YM capabilities of competing airlines. This study makes use of a simulation model that includes both passenger choice behavior and the actual functions of airline yield management systems. We used this simulation model to evaluate the impacts of YM systems on the market shares, traffic and revenues of each competitor in a hypothetical market, as well as on the market as a whole.

Suggested Citation

  • Belobaba, Peter P. & Wilson, John L., 1997. "Impacts of yield management in competitive airline markets," Journal of Air Transport Management, Elsevier, vol. 3(1), pages 3-9.
    • Handle: RePEc:eee:jaitra:v:3:y:1997:i:1:p:3-9
    DOI: 10.1016/S0969-6997(97)82787-1
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    References listed on IDEAS

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    1. Peter P. Belobaba, 1989. "OR Practice—Application of a Probabilistic Decision Model to Airline Seat Inventory Control," Operations Research, INFORMS, vol. 37(2), pages 183-197, April.
    2. Lawrence R. Weatherford & Samuel E. Bodily, 1992. "A Taxonomy and Research Overview of Perishable-Asset Revenue Management: Yield Management, Overbooking, and Pricing," Operations Research, INFORMS, vol. 40(5), pages 831-844, October.
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    Cited by:

    1. Larry Weatherford, 2018. "Simulation shows not to panic about bid price dysfunction close to departure," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(6), pages 403-419, December.
    2. Farhad Etebari, 2020. "Pricing Competition Under Specific Discrete Choice Models," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-14, March.
    3. Zhu, Chenbo & Hu, JianQiang, 2020. "Revenue management games with government mandate," Omega, Elsevier, vol. 93(C).
    4. Larry Weatherford, 2019. "Performance of dynamic user influence strategies in PODS under seasonality and system volatility," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(1), pages 2-26, February.
    5. Cynthia Barnhart & Peter Belobaba & Amedeo R. Odoni, 2003. "Applications of Operations Research in the Air Transport Industry," Transportation Science, INFORMS, vol. 37(4), pages 368-391, November.
    6. Tuo Wang & Esther Gal-Or & Rabikar Chatterjee, 2009. "The Name-Your-Own-Price Channel in the Travel Industry: An Analytical Exploration," Management Science, INFORMS, vol. 55(6), pages 968-979, June.
    7. Zhao, Guihong & Cui, Yue & Cheng, Shaoyu, 2021. "Dynamic pricing of ancillary services based on passenger choice behavior," Journal of Air Transport Management, Elsevier, vol. 94(C).
    8. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    9. Larry Weatherford, 2016. "Tests of revenue management performance under different demand correlation assumptions," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(5), pages 399-416, October.
    10. Larry Weatherford, 2017. "Do hybrid forecasting and forecast multipliers still work in a “perfectly tuned” PODS international network with four competing airlines?," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(6), pages 580-593, December.
    11. Fukushi, Mitsuyoshi & Delgado, Felipe & Raveau, Sebastián & Santos, Bruno F., 2022. "CHAIRS: A choice-based air transport simulator applied to airline competition and revenue management," Transportation Research Part A: Policy and Practice, Elsevier, vol. 155(C), pages 297-315.
    12. Serguei Netessine & Robert A. Shumsky, 2005. "Revenue Management Games: Horizontal and Vertical Competition," Management Science, INFORMS, vol. 51(5), pages 813-831, May.
    13. Sam Liu, Chih-Hsing & Jack Liu, Hsiou-Hsiang & Ng, Yen-Ling, 2021. "Investigation of entrepreneurial orientation development with airline employees: Moderating roles of a cooperation-competition mechanism," Journal of Air Transport Management, Elsevier, vol. 94(C).
    14. Gorin, Thomas & Belobaba, Peter, 2004. "Impacts of entry in airline markets: effects of revenue management on traditional measures of airline performance," Journal of Air Transport Management, Elsevier, vol. 10(4), pages 257-268.
    15. Adam Bockelie & Peter Belobaba, 2017. "Incorporating ancillary services in airline passenger choice models," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(6), pages 553-568, December.
    16. Ko, Young Dae, 2019. "The airfare pricing and seat allocation problem in full-service carriers and subsidiary low-cost carriers," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 92-102.
    17. Saab, Samer S. & Zouein, Pierrette P., 2001. "Forecasting passenger load for a fixed planning horizon," Journal of Air Transport Management, Elsevier, vol. 7(6), pages 361-372.
    18. Zhao, Xuan & Atkins, Derek & Hu, Ming & Zhang, Wensi, 2017. "Revenue management under joint pricing and capacity allocation competition," European Journal of Operational Research, Elsevier, vol. 257(3), pages 957-970.
    19. E. Andrew Boyd & Ioana C. Bilegan, 2003. "Revenue Management and E-Commerce," Management Science, INFORMS, vol. 49(10), pages 1363-1386, October.
    20. Koo, Tay T.R. & Tan, David T. & Duval, David Timothy, 2013. "Direct air transport and demand interaction: A vector error-correction model approach," Journal of Air Transport Management, Elsevier, vol. 28(C), pages 14-19.
    21. Gorin, Thomas & Belobaba, Peter, 2008. "Assessing predation in airline markets with low-fare competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(5), pages 784-798, June.

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