Optimal baggage allowance design for passenger airlines with pooling effect for baggage demand

Prabhupad Bharadwaj () and R. K. Amit ()
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Prabhupad Bharadwaj: Department of Management Studies (DoMS)
R. K. Amit: Department of Management Studies (DoMS)

Journal of Revenue and Pricing Management, 2025, vol. 24, issue 6, No 3, 524-538

Abstract: Abstract This study investigates the relationship between baggage allowances and airline profitability through a mathematical framework. Using a causal loop diagram, it analyzes the interactions among model components to identify how baggage allowances influence passenger demand. We use a first-order stochastic dominance approach to illustrate the demand-stimulating effect of baggage allowance on baggage demand. Our model highlights the key parameters related to baggage transport and examines the effect of cost and price, while determining the optimal free baggage limit. Extending the model to a two-class scenario, results confirm the practice of assigning a higher allowance to business-class passengers over economy-class passengers. The final part of our analysis includes ticket price as a decision variable in the model and assumes a demand function that has a combined effect on ticket fare and baggage allowance.

Keywords: Air transport; Baggage allowance; Stochastic dominance; Two-way substitution; Pooled demand effect (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1057/s41272-025-00524-x

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