EasyJet Ticket Pricing and the Game of Chicken
Unlike its planes, Easyjet prices go up but don't come down. Easyjet's dynamic pricing model may sometimes slow the rate at which ticket prices go up, but bargain-hunters who wait until the last minute will invariably be disappointed. That's the conclusion of new research by Claudio Piga, Marco Alderighi and Alberto Gaggero, presented at the Royal Economic Society's annual conference.
The study tracks price increases for 37,489 flights offered by the budget carrier, and finds that tiers of ticket pricing rise steadily as seats are sold. That's because limited ‘buckets’ of seats at each price sell out, before new, higher-priced buckets are offered.
For one flight in eight, they researchers find that seat prices went up close to departure date even when no seats were sold, as last-minute buyers are less sensitive to price. But while more seats may be allocated to each lower-tier bucket if the flight is not full, the airline never slashes prices at the last minute. This mean we no longer see those fabled last-minute ticket bargains.
The authors explain: ‘Easyjet faces a strong incentive to reduce fares in the attempt to minimise the number of empty seats at take-off. But dropping fares too often would attract the attention of strategic customers, who would postpone purchase, hoping for some last-minute discounts.’
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