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Targeting leisure and business passengers with unsegmented pricing

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  • Alderighi, Marco
  • Nicolini, Marcella
  • Piga, Claudio A.

Abstract

We analyse the fare setting strategy of a leading European low-cost carrier, Ryanair, which, until recently, adopted an unsegmented pricing policy (all tickets belong to a single fare class). We show that, to account for different demand characteristics, the company adjusts the two main components governing the dynamics of posted fares, namely time (the number of days before departure) and capacity (the current number of available seats). We find that: 1) in routes with a strong presence of leisure (business) traffic, fares are set to be less (more) responsive to the time component; 2) in schedules more suitable for leisure (business) travellers, fares are set to be less (more) responsive to the capacity component.

Suggested Citation

  • Alderighi, Marco & Nicolini, Marcella & Piga, Claudio A., 2016. "Targeting leisure and business passengers with unsegmented pricing," Tourism Management, Elsevier, vol. 54(C), pages 502-512.
    • Handle: RePEc:eee:touman:v:54:y:2016:i:c:p:502-512
    DOI: 10.1016/j.tourman.2015.12.014
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    Cited by:

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    2. Gaggero, Alberto A. & Ogrzewalla, Lukas & Bubalo, Branko, 2019. "Pricing of the long-distance bus service in Europe: The case of Flixbus," Economics of Transportation, Elsevier, vol. 19(C), pages 1-1.
    3. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2022. "Hidden prices with fixed inventory: Evidence from the airline industry," Transportation Research Part B: Methodological, Elsevier, vol. 157(C), pages 42-61.
    4. Alderighi, Marco & Nava, Consuelo R. & Calabrese, Matteo & Christille, Jean-Marc & Salvemini, Chiara B., 2022. "Consumer perception of price fairness and dynamic pricing: Evidence from Booking.com," Journal of Business Research, Elsevier, vol. 145(C), pages 769-783.
    5. Philippe Wendt & Augusto Voltes-Dorta & Pere Suau-Sanchez, 2020. "Estimating the costs for the airport operator and airlines of a drone-related shutdown: an application to Frankfurt international airport," Journal of Transportation Security, Springer, vol. 13(1), pages 93-116, June.
    6. Avogadro, Nicolò & Malighetti, Paolo & Redondi, Renato & Salanti, Andrea, 2021. "A tale of airline competition: When full-service carriers undercut low-cost carriers fares," Journal of Air Transport Management, Elsevier, vol. 92(C).
    7. Alderighi, Marco & Nicolini, Marcella & Piga, Claudio A., 2019. "Is low-cost carriers’ revenue management a firm capability?," Journal of Air Transport Management, Elsevier, vol. 78(C), pages 15-22.
    8. Meire, Sarah & Derudder, Ben, 2021. "Virtual interlining within the European airport network: An airfare analysis," Journal of Air Transport Management, Elsevier, vol. 94(C).
    9. Morlotti, Chiara & Cattaneo, Mattia & Malighetti, Paolo & Redondi, Renato, 2017. "Multi-dimensional price elasticity for leisure and business destinations in the low-cost air transport market: Evidence from easyJet," Tourism Management, Elsevier, vol. 61(C), pages 23-34.
    10. Bulchand-Gidumal, Jacques & Melián-González, Santiago, 2021. "Post-COVID-19 behavior change in purchase of air tickets," Annals of Tourism Research, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Dynamic pricing; Unsegmented pricing; Market segmentation; Ryanair;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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