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Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline

Author

Listed:
  • Marco Alderighi

    (Università della Valle d’Aosta)

  • Marcella Nicolini

    (Università di Pavia)

  • Claudio A. Piga

    (Keele University)

Abstract

Based on two strands of theoretical research, this paper provides new evidence on how fares are jointly affected by in-flight seat availability and purchasing date. As capacity-based theories predict, it emerges that fares monotonically and substantially increase with flight occupancy. After controlling for capacity utilization, our analysis also supports time-based theories, indicating a U-shaped temporal profile over a two-month booking period, as well as a sharp increase in fares in the two weeks prior to departure.

Suggested Citation

  • Marco Alderighi & Marcella Nicolini & Claudio A. Piga, 2015. "Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 900-915, October.
    • Handle: RePEc:tpr:restat:v:97:y:2015:i:4:p:900-915
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00451
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    More about this item

    Keywords

    Pricing policy; Panel Data; Ryanair; Yield Management;
    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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