Speaker: Xin Xie, Assistant Professor, Department of Economics and Finance, College of Business and Technology, East Tennessee State University, US
Date: June 8, 2017
Time: 10:30 am
Location: 401 Lecture Hall, Shaw Science Hall, Central Campus
Sponsor: the Center for Economic Research
Consumer heterogeneity drives airlines to compete with each other through product lines, in the form of a variety of products with different ticket policies (change and refund policies), seat options, and fare subclasses for a given flight. Using product level (flight-ticket) data from a Chinese provider of travel services, we find that the numbers of products an airline offers is not significantly affected by market competition (measured by HHI), but varies on the basis on airport network, time of travel (day of week and time of day), and advance purchase. We also characterize menu pricing within an airline’s product lines. Consumers face different tradeoffs between uncertainty and fare savings. As a result, menu pricing within product lines lead them to self select into different product varieties. Our results show that higher change/refund fee leads to lower qualities of products and in turn lower fares. Factors such as HHI, time of travel and advance purchase also help explain fare differences within an airline’s product line, after controlling for carrier and route fixed effects.
Dr. Xin Xie graduated from Kansas State University. She is currently assistant professor of Department of Economics and Finance, College of Business and Technology at East Tennessee State University. Her main research interests include Game Theory, Health Economics, Industrial Organization.
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Edited by: Zhao Yan