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Optimal fares under uncertainty about airline safety

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  • Jay Squalli

Abstract

This paper models consumers as expected utility maximizers in order to provide a theoretical assessment of the optimal fares that consumers are willing to pay when faced with uncertainty about airline safety. It is found that under an unsafe state of the world, consumers are willing to pay higher fares and under a safe state of the world, they are willing to pay lower fares. In addition, it is also found that consumers are willing to pay higher fares to maximize the compensation received from airlines in reaction to accidents.

Suggested Citation

  • Jay Squalli, 2005. "Optimal fares under uncertainty about airline safety," Applied Economics Letters, Taylor & Francis Journals, vol. 12(4), pages 223-226.
    • Handle: RePEc:taf:apeclt:v:12:y:2005:i:4:p:223-226
    DOI: 10.1080/1350485042000323640
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    References listed on IDEAS

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    1. Dorman,Peter, 2009. "Markets and Mortality," Cambridge Books, Cambridge University Press, number 9780521123044, September.
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    Cited by:

    1. Tomasz Stanisław Szopiński & Robert Nowacki, 2015. "The Influence of Purchase Date and Flight Duration over the Dispersion of Airline Ticket Prices," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(3), September.

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