Testing for common sense (violation) in airline pricing or how complexity asymmetry defeated you and

Discussion in 'General Discussion | Travel' started by Switch2, Sep 18, 2015.  |  Print Topic

  1. Switch2

    Switch2 Silver Member

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    We have collected and analysed prices for more than 1.4 million flight tickets involving 63 destinations and 125 airlines and have found that common sense violation i.e., discrepancies between what consumers would expect and what truly holds for those prices, are far more frequent than one would think. For example, oftentimes the price of a single leg flight is higher than two-leg flights that include it under similar terms of travel (class, luggage allowance, etc.). This happened for up to 24.5% of available fares on a specific route in our dataset invalidating the common expectation that "further is more expensive". Likewise, we found several two-leg fares where buying each leg independently leads to lower overall cost than buying them together as a single ticket. This happened for up to 37% of available fares on a specific route invalidating the common expectation that "bundling saves money". Last, several single stop tickets in which the two legs were separated by 1-5 days (called multicity fares), were oftentimes found to be costing more than corresponding back-to-back fares with a small transit time. This was found to be occurring in up to 7.5% fares on a specific route invalidating that "a short transit is better than a longer one".

    Entire paper is here if this sort of info interests you: http://arxiv.org/pdf/1509.05382v1

    Edit: I found this online - I like data. I did not participate in creating this paper.
     
    Last edited: Sep 18, 2015
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  2. Wandering Aramean
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    Wandering Aramean Gold Member

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    Only an expectation for those who choose to believe that price is tied to the cost of delivering the service rather than what the market will bear. Honestly, I'm surprised it was only 25% of the time. I would have bet it to be higher.
     
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  3. Newscience

    Newscience Gold Member

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    Nice work - thanks for posting!
     
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  4. iolaire
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    iolaire Gold Member

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    Note this is a link to a PDF of the paper.
     
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  5. Wandering Aramean
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    Wandering Aramean Gold Member

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    Just ready some more. The assumptions are flawed and the data only accounts for itineraries in Europe which can be scraped from ITA. Big gaps and worth disclosing up front.

    Also, this:
    Requiring identical fare class skews the data terribly. It ignores the way airlines price tickets. It should not be surprising that KL charges more for BRU-AMS+AMS-STR than a through fare on BRU-STR, especially when requiring the identical fare class.

    I mostly stopped that that point. Starting research with horribly flawed assumptions to test against rarely ends well.
     
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