Dynamic pricing mechanisms for the airline industry: a definitional framework
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41272_2018_162_ReferencePDF.pdf
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827.01 KB
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Author(s)
Wittman, Michael D.
Belobaba, Peter P
Date Issued
October 2018
Journal
Journal of Revenue and Pricing Management
Publisher
Springer Science and Business Media LLC
Citation
Wittman, Michael D. and Peter P. Belobaba. "Dynamic pricing mechanisms for the airline industry: a definitional framework." Journal of Revenue and Pricing Management 18, 2 (October 2018): 100–106 © 2018 Springer Nature Limited
Version
Author's final manuscript
Abstract
The phrase “dynamic pricing” has entered the airline revenue management lexicon in recent years with the emergence of new distribution capabilities that could allow airlines to adjust ticket prices more frequently. Yet each airline, vendor, and academic has a unique (and often incongruous) view of what dynamic pricing encompasses. To date, there has not been a definition of dynamic pricing proposed in the literature that clearly delineates how these mechanisms are different from traditional airline pricing and revenue management. In this paper, we propose a definitional framework for dynamic pricing for the airline industry. After providing a general definition of dynamic pricing, we describe three mechanisms for price selection—assortment optimization, dynamic price adjustment, and continuous pricing. Depending on the implementation and the information available to the airline at the time of pricing, each of these mechanisms could be used to adjust prices relatively infrequently or, at the limit, on a transaction-by-transaction basis. We close by linking recent technological developments in airline pricing, revenue management, and distribution to the three mechanisms introduced in the framework.
MIT Department
Massachusetts Institute of Technology. Department of Aeronautics and Astronautics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1057/s41272-018-00162-6
