Title: A market-level pricing model for airlines

Authors: R.E. Curry

Addresses: Tycho Systems, Inc., 2395 Delaware Avenue 21, Santa Cruz, CA 95060, USA

Abstract: Airline Revenue Management has typically focused on an optimisation problem choose inventory control settings to maximise revenues. Airline pricing is more difficult because the actions of competitors must be incorporated into the pricing decision leading to a game theoretic formulation. To support this game theoretic view, this paper develops a market-level pricing model that provides insight as to whether an airline should or should not match the new fare of a competitor to maximise revenue. The model also shows that matching competitors| prices preserves market share. The application of consumer choice models to individual flight departures is also discussed.

Keywords: airline pricing; consumer choice; choice model.

DOI: 10.1504/IJSTM.2001.001598

International Journal of Services Technology and Management, 2001 Vol.2 No.1/2, pp.173-185

Available online: 10 Jul 2003 *

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