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

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.

Citation

(2015). Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline. Review of Economics and Statistics, 900-915. https://doi.org/10.1162/REST_a_00451

• Acceptance Date: Feb 13, 2014
• Publication Date: Sep 28, 2015
• Journal: Review of Economics and Statistics
• Print ISSN: 0034-6535
• Publisher: Massachusetts Institute of Technology Press
• Pages: 900-915
• DOI: https://doi.org/10.1162/REST_a_00451
• Keywords: pricing policy, panel data, Ryanair, yield management
• Publisher URL: https://doi.org/10.1162/REST_a_00451