Price Elasticity of Demand for Domestic Air Travel in the United States: A Robust Quasi-Experimental Estimation

Ignacio Escañuela Romana (), Mercedes Torres-Jiménez and Mariano Carbonero-Ruz
Additional contact information
Mercedes Torres-Jiménez: Universidad Loyola Andalucía
Mariano Carbonero-Ruz: Universidad Loyola Andalucía

Atlantic Economic Journal, 2023, vol. 51, issue 2, No 3, 149-167

Abstract: Abstract Estimating the price elasticity of demand for air transport is essential to understand how demand responds to price variations and thus propose appropriate public policies and business strategies oriented toward this sector’s sustainability in its triple aspect (economic, environmental and social). This paper aims to provide a robust quantification of the price elasticity of demand for air travel on U.S. domestic routes using quarterly data from 1996:1 to 2021:4 on these routes from the Bureau of Transportation Statistics' Airline Origin and Destination Survey. Four different samples are analyzed to ensure consistency of the estimates obtained. The estimation method and the origin of the price changes are the main contributions of this research. Estimation is conducted using a quasi-experimental method to ensure that the supply curve shifts on a stable demand curve and that measuring the response of demand to price changes enables predictions about the demand for air travel. Although previous studies have addressed this issue, this research analyses a different situation, with flexible and changing prices, in which the change in supply is due to the decisions of the companies operating in the market rather than generated by public policies and rigid pricing environments (fixed fares). An analysis of airline supply shifts is added for the selected periods and routes. The estimation shows that the demand for passenger airline seats in the analyzed context is inelastic in the lower range but within the interval of most of the estimates found in the literature.

Keywords: Air transport demand; Elasticity; Quasi-experiment; Robust estimation (search for similar items in EconPapers)
JEL-codes: C14 C18 D12 L93 R41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11293-023-09779-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:atlecj:v:51:y:2023:i:2:d:10.1007_s11293-023-09779-4

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11293/PS2

DOI: 10.1007/s11293-023-09779-4

Access Statistics for this article

Atlantic Economic Journal is currently edited by Kathleen S. Virgo

More articles in Atlantic Economic Journal from Springer, International Atlantic Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().