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dc.contributor.authorPierson, Kawika
dc.contributor.authorSterman, John
dc.date.accessioned2014-06-30T14:08:54Z
dc.date.available2014-06-30T14:08:54Z
dc.date.issued2013-07
dc.identifier.issn08837066
dc.identifier.issn1099-1727
dc.identifier.urihttp://hdl.handle.net/1721.1/88125
dc.description.abstractAggregate airline industry earnings have exhibited large-amplitude cyclical behavior since deregulation in 1978. To explore the causes of these cycles we develop a behavioral dynamic model of the airline industry with endogenous capacity expansion, demand, pricing, and other feedbacks; and model several strategies industry actors have employed in efforts to mitigate the cycle. We estimate model parameters by maximum likelihood methods during both partial model tests and full model estimation using Markov chain Monte Carlo methods to establish confidence intervals. Contrary to prior work we find that the delay in aircraft acquisition (the supply line of capacity on order) is not a very influential determinant of the profit cycle. Instead we find that aggressive use of yield management—varying prices to ensure high load factors (capacity utilization)—may have the unintended effect of increasing earnings variance by increasing the sensitivity of profit to changes in demand.en_US
dc.language.isoen_US
dc.publisherWiley Blackwellen_US
dc.relation.isversionofhttp://dx.doi.org/10.1002/sdr.1501en_US
dc.rightsCreative Commons Attribution-Noncommercial-Share Alikeen_US
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/4.0/en_US
dc.sourceMIT web domainen_US
dc.titleCyclical dynamics of airline industry earningsen_US
dc.typeArticleen_US
dc.identifier.citationPierson, Kawika, and John D. Sterman. “Cyclical Dynamics of Airline Industry Earnings.” Syst. Dyn. Rev. 29, no. 3 (July 2013): 129–156.en_US
dc.contributor.departmentSloan School of Managementen_US
dc.contributor.mitauthorSterman, Johnen_US
dc.relation.journalSystem Dynamics Reviewen_US
dc.eprint.versionAuthor's final manuscripten_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/PeerRevieweden_US
dspace.orderedauthorsPierson, Kawika; Sterman, John D.en_US
dc.identifier.orcidhttps://orcid.org/0000-0001-7476-6760
mit.licenseOPEN_ACCESS_POLICYen_US
mit.metadata.statusComplete


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