Air travel demand; Itinerary choice models; Endogeneity
Abstract :
[en] This study formulates an itinerary choice model that is consistent with those used by industry and corrects for price endogeneity using a control function that uses several types of instrumental variables. We estimate our models using database of more than 3 million tickets provided by the Airlines Reporting Corporation. Results based on Continental U.S. markets for May 2013 departures show that models that fail to account for price endogeneity overestimate customers’ value of time and result in biased price estimates and incorrect pricing recommendations. Extensions to advanced discrete choice models show the importance of accounting for inter-alternative substitution for products that share similar departure times.
Research Center/Unit :
QuantOM
Disciplines :
Quantitative methods in economics & management
Author, co-author :
Lurkin, Virginie ; Université de Liège > HEC-Ecole de gestion : UER > UER Opérations : Informatique de gestion
Garrow, Laurie; Georgia Institute of Technology > Civil Engineering
Higgins, Matthew; Georgia Institute of Technology > Scheller College of Business
Newman, Jeffrey
Schyns, Michael ; Université de Liège > HEC-Ecole de gestion : UER > UER Opérations : Informatique de gestion
Language :
English
Title :
Accounting for price endogeneity in airline itinerary choice models
Publication date :
20 May 2016
Event name :
AGIFORS RM Study Group
Event organizer :
AGIFORS
Event place :
Frankfurt, Germany
Event date :
18-20 May
Audience :
International
Funders :
F.R.S.-FNRS - Fonds de la Recherche Scientifique [BE]