An integrated Markov decision process and nested logit consumer response model of air ticket pricing

J. Lu, T. Feng, H.P.J. Timmermans, Z. Yang

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
183 Downloads (Pure)

Abstract

The paper attempts to propose an optimal air ticket pricing model during the booking horizon by taking into account passengers' purchasing behavior of air tickets. A Markov decision process incorporating a nested logit consumer response model is established to modeling the dynamic pricing process. The proposed model is estimated and applied using the data collected in a multi-airport region with competition in China. Results indicate that, by considering air ticket purchasing behavior, air ticket price can be set dynamically and optically in response to the changes in exogenous factors which are not controlled by airlines.

Original languageEnglish
Pages (from-to)544-567
Number of pages24
JournalTransportmetrica A: Transport Science
Volume13
Issue number6
DOIs
Publication statusPublished - 3 Jul 2017

Keywords

  • air ticket purchasing behavior
  • Markov decision process
  • multi-airport area
  • nested logit model
  • Pricing strategy

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