Tabulated decision aids and airfare pricing
When people shop for airline tickets, the effort-demanding cognitive process of assessing alternative travel dates may have significant effects on consumer decisions. With the advent of the Internet, consumers are gaining access to a growing number of alternative flights. Decision support tools can assist consumers in their search for travel dates and price combinations. Airline carriers have started offering such tools to support flexible travel-date searches on their websites. In this research, we analyze the economic effects of such tools. We hypothesize that these tools directly affect airline carriers' pricing schemes. As airline carriers display more alternatives on a flexible date search, price variation and number of price changes are expected to decrease, and the average price is expected to increase. We empirically test our hypotheses using airfares from a wide range of US domestic routes. The results broadly support our hypotheses. (C) 2011 Elsevier B.V. All rights reserved.
internet decision support airline industry dynamic pricing price dispersion