Are You Making Mistakes When Booking Airline Tickets?

Once upon a time, people believed in some clever tricks to get cheaper airline tickets. Things like booking flights on a Tuesday, using incognito mode in your web browser, or using virtual private networks (VPNs) to pretend you’re in a different country. But guess what? A new study has come along and said, “Not so fast!”

This study is like a flashlight shining on the world of airline ticket prices. It challenges what we thought we knew about how airlines set their prices. And if we understand this better, it can help us travelers be smarter about how we buy our plane tickets.

This study was led by Olivia Natan, a professor at the Haas School of Business. She and her team of researchers looked into the nitty-gritty of how airlines price their tickets. And what they found might surprise you. They even published their findings in a fancy journal called The Quarterly Journal of Economics.

First of all, the study says airlines don’t really think about you switching to another flight when they decide how much to charge. You know how you might pick a more convenient flight even if it’s a bit more expensive? Airlines don’t factor that in when they set prices.

Then, here’s the really surprising part: airlines don’t pay much attention to what other airlines are charging. In a competitive market, you’d expect them to lower their prices when a rival does. But the study found they use a thing called Expected Marginal Seat Revenue-b (EMSRb) to figure out prices. It lets them set prices for lots of flights quickly, without worrying about what the competition is doing.

The study also says airlines have a weird way of setting prices. Instead of adjusting prices in tiny amounts, they have these big price gaps. Like, the first 30 tickets are cheap, the next 30 are pricier, and so on.

This strange pricing is because of something called global distribution systems that airlines use to keep prices the same across different places. It’s all about managing their tickets better.

Usually, airlines stick to this way of pricing with big gaps. But there’s a new way of doing things called “continuous revenue management” that’s becoming more popular. It means they might change prices more often, but it’s still not as precise as you might think.

And here’s the big mystery: Airlines don’t always raise prices even when they could make more money by doing so. This goes against what we’d expect in economics. They often offer tickets for less than they should. Sometimes they don’t use their own forecasts for demand when deciding on prices. It’s like leaving money on the table.

But don’t worry, they have a team that fixes these mistakes by guessing higher demand and selling fewer tickets for less. This helps the airlines keep their revenue safe.

So, there you have it, the secret world of airline ticket pricing isn’t as simple as we thought. It’s a bit like a puzzle, and airlines have their own ways of solving it. The next time you’re booking a flight, just remember that all those tricks you heard about might not work as well as you think.

Want to save money on your flights? Here are some easy ways:

1. Book Early: Plan ahead and book your tickets in advance.
2. Flexible Dates: Be open to flying on different days to find lower prices.
3. Compare Prices: Use websites like Expedia or Google Flights to compare fares.
4. Get Alerts: Sign up for fare alerts to know when prices drop.
5. Alternate Airports: Check nearby airports for better deals.
6. Travel Light: Avoid extra baggage fees by packing light.
7. Round-Trip Savings: Often, round-trip tickets are cheaper.
8. Loyalty Programs: Join airline loyalty programs for rewards.
9. Clear Cookies: Use incognito mode to prevent price hikes.
10. Social Media Deals: Follow airlines on social media for exclusive offers.
11. Sales and Discounts: Look for special sales and discounts.
12. Consider Layovers: Sometimes, flights with stops are more affordable.
13. Negotiate: Call airlines directly to haggle for better prices.
14. Student or Military Discounts: Check for special discounts if you’re eligible.
15. Use Travel Points: Redeem credit card travel points for savings.