Browsing in an incognito window, buying on a Tuesday, and using a VPN to change your location are all commonly described as ways to find cheap airline tickets. These air travel hacks have been accepted as fact by many people, but how much of a difference do these factors make when it comes time to book a flight? As it turns out, not at all.
A recent study from The Quarterly Journal of Economics titled “Organizational Structure and Pricing: Evidence from a Large U.S. Airline” determined that finding cheap airfare is not influenced by variables such as the time of day, browser history, or the location of the buyer. In fact, the price of flights is more random than you may think.
In the study, researchers took a look at how airlines determine ticket prices. As it turns out, finding cheap airline tickets is more about good luck than anything else. Airlines do not take into consideration factors such as consumer substitution (choosing a cheaper, less convenient flight at a lower price) or the prices of competitors.
Instead, airlines use a pricing strategy called Expected Marginal Seat Revnue-b (EMSRb) to quickly set prices for multiple flights at once. This pricing shortcut takes into account the money the airline makes from selling the ticket as well as the future revenue from that seat. A formula is used to find the right balance between these two factors and helps airlines set prices for their seats in a way that maximizes their overall revenue.
EMSRb results in a limited number of mixed prices for tickets on any given flight, so prices do not change in real-time as you may expect.
When it comes to finding the cheapest flights, you will often do so at the fault of the airline’s pricing teams. The pricing teams sometimes choose prices that are far too low, which is simply a result of poor communication between departments.
“We talked to all of these managers who said the pricing team doesn’t know what it’s doing,” Olivia Natan, an assistant professor of marketing at the Haas School of Business and co-author of the study, explained to Phys.org. “We find that these prices are a consequence of teams from different departments choosing the best pricing inputs when they are unable to coordinate.”
Although travel prices are not currently influenced by the buyer or competitor airlines, they could be in the future. Airlines are starting to experiment with more flexible pricing systems that would benefit non-business travelers, but for now, finding a magical hack to purchase cheap airline tickets is difficult.
While there are many tips and tricks circulating about finding cheap airfare, the way airlines price their tickets is not as responsive to consumer actions or competition as you might think. (Of course, the research doesn’t say that these hacks are harmful to finding a cheap flight either, so if you’ve found a system that works for you, feel free to stick with it.)
The only fact that Natan was able to confirm is that prices tend to go up significantly 21, 14, and 7 days before a flight, so make sure you purchase your tickets before this time frame.
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