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The impact of fare pricing cooperation in airline revenue management

Author

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  • S. Asif Raza
  • Ali Akgunduz

Abstract

This article addresses an airline revenue management strategy to jointly determine both the seat allocation and the fare price for a single leg flight in a duopoly market. Two game theoretic scenarios: non-cooperative and cooperative are considered. In non-cooperative game setting, existence of pure strategy Nash Equilibrium for the perfect competition between two airlines is shown. In cooperative scenario, two bargain games that differ in availability of side payment (SP) option while sharing of the gain of cooperation are studied. Numerical study based on a series of statistical comparisons shows that cooperation with the SP options results superior payoffs to both airlines compared to cooperation with no SP options. A regression analysis is used to analyse the impact of various market factors on payoffs.

Suggested Citation

  • S. Asif Raza & Ali Akgunduz, 2010. "The impact of fare pricing cooperation in airline revenue management," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 7(3), pages 277-296.
    • Handle: RePEc:ids:ijores:v:7:y:2010:i:3:p:277-296
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    Cited by:

    1. Zhu, Chenbo & Hu, JianQiang, 2020. "Revenue management games with government mandate," Omega, Elsevier, vol. 93(C).
    2. Syed Asif Raza & Rafi Ashrafi & Ali Akgunduz, 2020. "A bibliometric analysis of revenue management in airline industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(6), pages 436-465, December.

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