IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v40y2014icp56-64.html
   My bibliography  Save this article

On the fairness of airlines’ ticket pricing as a result of revenue management techniques

Author

Listed:
  • Aslani, Shirin
  • Modarres, Mohammad
  • Sibdari, Soheil

Abstract

Pricing and availability of tickets have always been a source of confusion for customers in transportation industries. What is the best time to buy tickets? Why passengers taking the same flight might pay significantly different prices for the same seat? Why round trip tickets between two cities sometimes become cheaper than the one-way flights between them? Is it fair to buy a ticket for an itinerary cheaper than a ticket for just a part of it? These observations make customers wonder why they pay higher prices for shorter flights. In this paper, we study the airlines’ revenue management systems and explain some of these pricing schemes in travel industries. We develop a simulator to study the decision making process of network revenue management and use a numerical study to explore these questions and address some explanations for them. We relate these observations to the revenue management measurements such as the bid price or the adjustment cost and show how the dynamic of the network get influenced by these measures that eventually results in unusual pricing. We explain how a zero or small bid price of a specific leg may cause the price of an itinerary be cheaper than one segment of it and that the small bid price is caused by low demand in comparison to the available capacity. We exhibit network revenue management system and show the above issues for a small network.

Suggested Citation

  • Aslani, Shirin & Modarres, Mohammad & Sibdari, Soheil, 2014. "On the fairness of airlines’ ticket pricing as a result of revenue management techniques," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 56-64.
    • Handle: RePEc:eee:jaitra:v:40:y:2014:i:c:p:56-64
    DOI: 10.1016/j.jairtraman.2014.05.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699714000556
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2014.05.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Garrett van Ryzin & Gustavo Vulcano, 2008. "Computing Virtual Nesting Controls for Network Revenue Management Under Customer Choice Behavior," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 448-467, October.
    2. Guillermo Gallego & Garrett van Ryzin, 1997. "A Multiproduct Dynamic Pricing Problem and Its Applications to Network Yield Management," Operations Research, INFORMS, vol. 45(1), pages 24-41, February.
    3. Huseyin Topaloglu, 2009. "Using Lagrangian Relaxation to Compute Capacity-Dependent Bid Prices in Network Revenue Management," Operations Research, INFORMS, vol. 57(3), pages 637-649, June.
    4. Badinelli, Ralph D., 2000. "An optimal, dynamic policy for hotel yield management," European Journal of Operational Research, Elsevier, vol. 121(3), pages 476-503, March.
    5. Georgia Perakis & Guillaume Roels, 2010. "Robust Controls for Network Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 56-76, November.
    6. Dan Zhang & Daniel Adelman, 2009. "An Approximate Dynamic Programming Approach to Network Revenue Management with Customer Choice," Transportation Science, INFORMS, vol. 43(3), pages 381-394, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jost Daft & Sascha Albers & Sebastian Stabenow, 2021. "From product-oriented flight providers to customer-centric retailers: a dynamic offering framework and implementation guidelines for airlines," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(6), pages 615-625, December.
    2. Gaggero, Alberto A. & Luttmann, Alexander, 2023. "The determinants of hidden-city ticketing: Competition, hub-and-spoke networks, and advance-purchase requirements," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 173(C).
    3. Masood Kiarashrad & Seyed Hamid Reza Pasandideh & Mohammad Mohammadi, 2021. "Identifying and prioritizing the essential factors on ticket pricing strategy in a local market based on empirical study: Iranian domestic market," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(1), pages 76-87, February.
    4. An, Jaehyung & Mikhaylov, Alexey & Jung, Sang-Uk, 2021. "A Linear Programming approach for robust network revenue management in the airline industry," Journal of Air Transport Management, Elsevier, vol. 91(C).
    5. Sun, Xiaoqian & Wandelt, Sebastian & Zhang, Anming, 2023. "Price discrimination through hidden city options? A data-driven study on the extent and evolution of skiplaggability in the global aviation system," Journal of Air Transport Management, Elsevier, vol. 108(C).
    6. Klein, Robert & Kolb, Johannes, 2015. "Maximizing customer equity subject to capacity constraints," Omega, Elsevier, vol. 55(C), pages 111-125.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Meissner, Joern & Strauss, Arne, 2012. "Network revenue management with inventory-sensitive bid prices and customer choice," European Journal of Operational Research, Elsevier, vol. 216(2), pages 459-468.
    2. Thomas W. M. Vossen & Dan Zhang, 2015. "Reductions of Approximate Linear Programs for Network Revenue Management," Operations Research, INFORMS, vol. 63(6), pages 1352-1371, December.
    3. Wuyang Yuan & Lei Nie & Xin Wu & Huiling Fu, 2018. "A dynamic bid price approach for the seat inventory control problem in railway networks with consideration of passenger transfer," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-23, August.
    4. Mika Sumida & Huseyin Topaloglu, 2019. "An Approximation Algorithm for Capacity Allocation Over a Single Flight Leg with Fare-Locking," INFORMS Journal on Computing, INFORMS, vol. 31(1), pages 83-99, February.
    5. Paat Rusmevichientong & Huseyin Topaloglu, 2012. "Robust Assortment Optimization in Revenue Management Under the Multinomial Logit Choice Model," Operations Research, INFORMS, vol. 60(4), pages 865-882, August.
    6. Meissner, Joern & Strauss, Arne, 2012. "Improved bid prices for choice-based network revenue management," European Journal of Operational Research, Elsevier, vol. 217(2), pages 417-427.
    7. Juan M. Chaneton & Gustavo Vulcano, 2011. "Computing Bid Prices for Revenue Management Under Customer Choice Behavior," Manufacturing & Service Operations Management, INFORMS, vol. 13(4), pages 452-470, October.
    8. Sebastian Koch & Jochen Gönsch & Michael Hassler & Robert Klein, 2016. "Practical decision rules for risk-averse revenue management using simulation-based optimization," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(6), pages 468-487, December.
    9. Dan Zhang & Zhaosong Lu, 2013. "Assessing the Value of Dynamic Pricing in Network Revenue Management," INFORMS Journal on Computing, INFORMS, vol. 25(1), pages 102-115, February.
    10. Dan Zhang & Larry Weatherford, 2017. "Dynamic Pricing for Network Revenue Management: A New Approach and Application in the Hotel Industry," INFORMS Journal on Computing, INFORMS, vol. 29(1), pages 18-35, February.
    11. Strauss, Arne K. & Klein, Robert & Steinhardt, Claudius, 2018. "A review of choice-based revenue management: Theory and methods," European Journal of Operational Research, Elsevier, vol. 271(2), pages 375-387.
    12. Guang Li & Paat Rusmevichientong & Huseyin Topaloglu, 2015. "The d -Level Nested Logit Model: Assortment and Price Optimization Problems," Operations Research, INFORMS, vol. 63(2), pages 325-342, April.
    13. Gustavo Vulcano & Garrett van Ryzin & Wassim Chaar, 2010. "OM Practice--Choice-Based Revenue Management: An Empirical Study of Estimation and Optimization," Manufacturing & Service Operations Management, INFORMS, vol. 12(3), pages 371-392, February.
    14. Yuhang Ma & Paat Rusmevichientong & Mika Sumida & Huseyin Topaloglu, 2020. "An Approximation Algorithm for Network Revenue Management Under Nonstationary Arrivals," Operations Research, INFORMS, vol. 68(3), pages 834-855, May.
    15. Pavithra Harsha & Shivaram Subramanian & Joline Uichanco, 2019. "Dynamic Pricing of Omnichannel Inventories," Service Science, INFORMS, vol. 21(1), pages 47-65, January.
    16. Nicolas Houy & François Le Grand, 2015. "The Monte Carlo first-come-first-served heuristic for network revenue management," Working Papers halshs-01155698, HAL.
    17. Dupuis Nicolas & Ivaldi Marc & Pouyet Jerome, 2020. "A Welfare Assessment of Revenue Management Systems," Review of Network Economics, De Gruyter, vol. 19(1), pages 1-41, March.
    18. Chaoxu Tong & Huseyin Topaloglu, 2014. "On the Approximate Linear Programming Approach for Network Revenue Management Problems," INFORMS Journal on Computing, INFORMS, vol. 26(1), pages 121-134, February.
    19. Sumit Kunnumkal & Huseyin Topaloglu, 2011. "A stochastic approximation algorithm to compute bid prices for joint capacity allocation and overbooking over an airline network," Naval Research Logistics (NRL), John Wiley & Sons, vol. 58(4), pages 323-343, June.
    20. Hossein Jahandideh & Julie Ward Drew & Filippo Balestrieri & Kevin McCardle, 2020. "Individualized Pricing for a Cloud Provider Hosting Interactive Applications," Service Science, INFORMS, vol. 12(4), pages 130-147, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:40:y:2014:i:c:p:56-64. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.