A study of the option pricing method in the agency problem between airlines and travel agents

Hsien-Tang Tsai, Chung-Gee Lin and Leo Huang

Journal of Air Transport Management, 2004, vol. 10, issue 2, 151-160

Abstract: The option pricing method is used to analyze the agency problem between airlines and travel agencies. An Airline Agency Option Pricing model is employed whereby different ticket price processes, the quantity targets of tickets sold, the correlation between the ticket price and ticket quantity, and various incentive programs affect the agency costs between airlines and travel agencies. It is found that airlines should cautiously design their incentive programs to mitigate the impact caused by the agency problem that could influence the operations of travel-related suppliers.

Keywords: Option pricing method; Airlines; Agency cost; Travel industry (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:10:y:2004:i:2:p:151-160

DOI: 10.1016/j.jairtraman.2003.09.003

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