Science, it can be depressing sometimes. Case in point; a gaggle of researchers from various colleges came together and found that there is no one weird trick for getting cheaper flights. In fact, airlines are probably leaving money on the table by not having a better system for pricing flights.
Oh sure, you probably heard on your morning news show that tickets are cheaper if you fly out on Thursdays after a full moon, and when the corn harvest has been plentiful, but that’s all hogwash. Four researchers—two from the University of Chicago and two from the University of Texas-Austin—crunched the numbers and then wrote a paper about airline ticket prices in the Quarterly Journal of Economics. Their research found that airlines just don’t operate like any other business, making the search for a deal a waste of time, assistant professor of marketing at the Haas School of Business Olivia Natan told Physics.org:
Perhaps most surprisingly, airlines also don’t incorporate the prices of their competitors in their automated price-setting. Typically, if one airline cut its prices, one would expect other firms to do the same. If they don’t, this dampens the benefits of a competitive market.
This unorthodox behavior, Natan explains, is the result of a specific pricing heuristic—or decision-making shortcut—that airlines use called Expected Marginal Seat Revenue-b, or EMSRb. The use of EMSRb, the researchers show, results in another outcome that consumers may not expect.
Despite how it may appear when looking for flights, airlines have a fixed and relatively small number of prices that they assign to tickets on each flight. Unlike other consumer sectors, where pricing can be adjusted and targeted down to the penny, airlines operate with large gaps between each possible price—sometimes upwards of $100. They may sell the first 30 economy tickets at the lowest price, and then the next 30 tickets at the next possible price, and so on.
“Airline tickets are sold through global distribution systems that make sure a travel agent in Wichita sees the same price as you do on your computer at home,” Natan says. This system emerged from an industry alliance to facilitate inventory management. Other businesses in the travel sector, like hotel rooms, cruises, trains, and car rentals do the same.
Add in a rigidity in calculating flights, lack of communication between departments at airlines and the difficulty in predicting demand and you’ve got ticket prices that are more up to the whim of the gods than any trickiness or sleight of hand. The entire story is a fascinating glimpse into this common modern headache. You can read it here.
