Airline price discrimination: a practice of yield management or customer profiling?

Dierckx, R.H.J. (2013) Airline price discrimination: a practice of yield management or customer profiling?

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Abstract:Prices of airline tickets frequently change, which is traditionally caused by yield management as price discrimination practice. In more recent times however, customer information is easily obtainable via the World Wide Web (e.g. through cookie data), which allows price discrimination based on customer profiling via cookie data or other electronic tracking tools. Consequently, a personal treatment might provide personalized ticket prices to customers. This paper aims to investigate whether price discrimination practices are applied by airlines in online ticket sales. A month-long experiment was executed in which two European full-service and two European low-cost carriers were followed and prices of sixteen routes were tracked. First, customer profiling as underlying practice of price discrimination was tested by tracking prices at two conditions: one computer accepted cookies, while cookies and other online tracking tools on the second computer were erased after each session. If price differences between these two conditions had existed, these differences should attribute to customer profiling. Second, yield management as price discrimination practice could be investigated by tracking prices over time. In this particular case, it was found that none of the airlines applied customer profiling based price discrimination since prices were identically the same at both conditions. Although customer-profiling tools were not used, customer information from direct sources such as online registrations are found to be crucial in segmentation processes. Other influences based on yield management were also identified. The two tested full-service carriers showed typical pricing patterns, whereas the two low-cost carriers did not show many fluctuations. Most changes occurred in the morning (56,5%) and the majority (52,2%) of fluctuations were minor price changes of 0%-5%. Therefore in conclusion, the appliance of customer profiling as pricing practice is not confirmed based on this particular research. However, yield management seems to act as an underlying practice of dynamic pricing.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration BSc (56834)
Link to this item:http://purl.utwente.nl/essays/63816
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