Dynamic pricing of ancillary services based on passenger choice behavior

Guihong Zhao, Yue Cui and Shaoyu Cheng

Journal of Air Transport Management, 2021, vol. 94, issue C

Abstract: Based on passenger choice behavior, a dynamic pricing mechanism of ancillary services has been brought up for analysis in this paper. With the analysis of the passenger choice behavior of ancillary services, this study (1) analyzed the pricing of ancillary services from airlines' websites, (2) launched a survey to investigate passengers’ characteristics and preferences, (3) applied the binary logistic model to analyze passenger choice of ancillary services, and integrated into the dynamic pricing model of ancillary services. The optimal prices can be obtained at the maximum of the revenue. Based on the historical data of a Chinese domestic flight, the optimal prices of ancillary services for different types of passengers can be obtained at the maximum revenue of ancillary services, with a 74.4% increase of revenue. This paper not only created a general pricing model for improving the ancillary revenue but also provided theoretical support for ancillary pricing. The model with enough data can be dynamically applied to various flights and ancillary services.

Keywords: Airline revenue management; Ancillary services; Choice behavior; Dynamic pricing (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:94:y:2021:i:c:s0969699721000417

DOI: 10.1016/j.jairtraman.2021.102058

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