Managing Airfares Under Competition: Insights from a Field Experiment

• 成果类型: Article
• 署名作者: Cohen, Maxima C.; Jacquillat, Alexandre; Serpa, Juan Camilo; Benborhoumc, Michael
• 署名单位: McGill University; Massachusetts Institute of Technology (MIT)
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4656
• 发表日期: 2023
• 页码: 6076-6108
• 关键词: airline pricing; field experiment; lead-in fare

摘要

Airfares evolve dynamically, giving rise to a so-called price path. This price path is controlled via two levers: (i) a fare ladder, which defines a set of airfares before the selling season, and (ii) revenue management algorithms, which control how fares evolve along the ladder during the season. We hypothesize that the current policies to control both levers-which do not account for quality differences between competing airlines-give rise to an inefficient price path and, accordingly, a loss of potential revenue. We substantiate this hypothesis via a field experiment. By partnering with an airline, we introduced quality considerations in the design of fare ladders, across 5,000 itineraries, to show that current ladder-design policies indeed lead to a suboptimal price path. We also show that this inefficiency can be mitigated by incorporating quality differences between competing airlines. This creates a smoother (and more profitable) price path.