This chapter estimates the demand for flights in an international air travel market using a unique dataset with detailed information not only on flight choices but also on contemporaneous prices and characteristics of all the alternative non-booked flights. The estimation strategy employs a simple discrete choice random utility model that we use to analyze how choices and its response to prices depend on the departing airport, the identity of the carrier, and the departure date and time. The results show that a 10% increase in prices in a 100-seat aircraft throughout a 100-period selling season decreases quantity demanded by 7.7 seats. We also find that the quantity demanded is more responsive to prices for Delta and American, during morning and evening flights and that the response to prices changes significantly over different departure dates.
We thank Stephanie Reynolds and Sang-Yeob Lee for their work with the data. We also thank the comments from an anonymous reviewer that helped improve the chapter.
Escobari, D. and Mellado, C. (2014), "The Choice of Airport, Airline, and Departure Date and Time: Estimating the Demand for Flights", The Economics of International Airline Transport (Advances in Airline Economics, Vol. 4), Emerald Group Publishing Limited, Bingley, pp. 177-198. https://doi.org/10.1108/S2212-160920140000004006
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