The impact of fare pricing cooperation in airline revenue management

S. Asif Raza and Ali Akgunduz

International Journal of Operational Research, 2010, vol. 7, issue 3, 277-296

Abstract: This article addresses an airline revenue management strategy to jointly determine both the seat allocation and the fare price for a single leg flight in a duopoly market. Two game theoretic scenarios: non-cooperative and cooperative are considered. In non-cooperative game setting, existence of pure strategy Nash Equilibrium for the perfect competition between two airlines is shown. In cooperative scenario, two bargain games that differ in availability of side payment (SP) option while sharing of the gain of cooperation are studied. Numerical study based on a series of statistical comparisons shows that cooperation with the SP options results superior payoffs to both airlines compared to cooperation with no SP options. A regression analysis is used to analyse the impact of various market factors on payoffs.

Keywords: airline revenue management; bargain game; fare pricing; Nash equilibrium; seat inventory control; seat allocation; game theory; cooperation; side payment. (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijores:v:7:y:2010:i:3:p:277-296

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