Airline fare and seat management strategies with demand dependency

Kofi Obeng and Ryoichi Sakano

Journal of Air Transport Management, 2012, vol. 24, issue C, 42-48

Abstract: This paper conceptualizes various discount strategies used by airlines. Using a constrained revenue maximization model that assumes interdependent demand, it develops rules to guide decision-making, and shows that the large fare discount-many discount seats and small fare discount-few discount seats strategies are optimal. Empirical support is provided for the large fare discount-many discount seats, the no fare discount-moderate discount seats and small fare premium-few discount seats strategies. In addition it identifies the large fare premium-very few discount seats strategies. We argue that these strategies are used in various demand situations and allow airlines to price discriminate.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:24:y:2012:i:c:p:42-48

DOI: 10.1016/j.jairtraman.2012.06.001

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