Conditional efficiency, operational risk and electronic ticket pricing strategies for the airline industry

Paul K. Bergey and Sangkil Moon

International Journal of Electronic Marketing and Retailing, 2009, vol. 2, issue 3, 239-255

Abstract: As the USA moves towards an economic slowdown and possible recession, the airline industry is particularly vulnerable to consumer price sensitivity regarding the purchase of electronic tickets. In this research, we provide a methodological approach that utilises operational risk metrics to examine the impact of various electronic ticket pricing strategies on profitability. Specifically, the work presented herein is differentiated from previous airline revenue management studies in the following ways: 1) we develop a Monte Carlo simulation model which can be used effectively to construct conditionally efficient discount ticket pricing strategies, 2) we show that the operational value at risk and expected shortfall are effective measures for weighing the risk-return tradeoffs for efficient discount ticket pricing strategies along the constructed frontier and 3) we implement a demand-recapturing variable in the simulation model where prior studies have assumed independent demand among various consumer classes.

Keywords: revenue management; airline ticket pricing; conditional efficiency; operational risk; electronic marketing; e-marketing; electronic retailing; e-retailing; USA; United States; e-tailing; electronic tickets; e-tickets; airline industry; Monte Carlo simulation; discount pricing. (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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