Drew Van Kuiken

We analyze consumer search and purchase behavior in response to airline revenue-management practices using data from a major carrier’s website and Google Flights. We first describe patterns in search timing, purchase decisions, and paid fares. Then we estimate a multinomial logistic regression to identify factors driving search timing, finding that single adults with loyalty status, especially booking one-way nonstop itineraries, tend to search closer to departure. Next, we use a binary logistic model of conversions of searches to sales, showing that competitors' prices and changing customer composition explain rising conversion probabilities as departure nears. Finally, using a fixed-effects regression, we reveal how search and booking patterns affect prices paid. Late-arriving travelers, particularly single adults with loyalty status, pay substantially more, consistent with the airline’s pricing strategies that segment more inelastic customers. Overall, our findings underscore how revenue-management, competitor fares, and consumer characteristics jointly shape online search and purchase behavior.

The airline industry has undergone many changes in the last 30 years and faced substantial scrutiny over performance and pricing. Our analysis combines a variety of data sources to provide a long-term perspective on market structure and its impact on consumer welfare. We begin by documenting trends in prices, network connectivity, consolidation, low-cost competition, passenger values, and measures of service quality. To measure the impact of these factors on consumer welfare, we estimate a structural model of price competition between airlines to recover consumer's preferences over service attributes and identify determinants of airline's costs. We find that consumer welfare has steadily improved over this period with increased low-cost competition and improvements to legacy networks being the primary contributors. We discuss the implications of our results for policy directed at the industry.