Estimating the impact of behavior heterogeneity on airfare choices

Jue Wang and Meifeng Luo

Journal of Air Transport Management, 2023, vol. 110, issue C

Abstract: Previous studies on airfare choices have discussed various types of heterogeneity. Based on these findings, this study investigated a type of non-trading behavior observed in the context of airfare booking. Required by the pricing and revenue management decisions, airline often offers hierarchical airfares subject to capacity constraints. This presents challenges in identifying the heterogeneous choice behaviors among air travelers and in the consequent demand estimation. To differentiate the trading and non-trading behavior of respondents, a stated preference (SP) experiment that allows variation of choice set composition was applied. Among the data, over 40% of respondents were observed to choose only from the non-flexible fare class. Identifying such heterogeneity can improve choice modelling and help better understand airfare choice behaviors. In addition, taking into account behavior heterogeneity may produce significantly different demand forecasts, according to which airlines may devise distinctive marketing strategies. Despite the managerial implications, there are some potential privacy and safety issues that may raise the awareness of policy-makers, and this has also been discussed in this research.

Keywords: Experimental design; Behavior heterogeneity; Non-trading behavior; Discrete choice model; Latent variable; Airfare choice; Market segmentation (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:110:y:2023:i:c:s0969699723000492

DOI: 10.1016/j.jairtraman.2023.102406

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