Why are more expensive air tickets to come the day of travel while theater tickets are sold at half price in Leicester Square the day of the show? In a recent article in the journal Economic Journal, entitled “Advance Purchase Discounts Clearance Sales versus (discounts for advance purchase against settlements), teachers of the Department of Economics UC3M, Marc Möller and Makoto Watanabe, study prices products can be purchased in advance, ie long before the date of consumption itself. Other examples are seasonal products like modern skiing equipment or a place to participate in a marathon.
According to what they have learned in this study, there are two factors determining the optimal planning of prices. On the one hand, when you buy soon, consumers are faced with doubts about their future needs. “When we booked our flight to London weeks before we have to reckon with the possibility that unforeseen circumstances arise that prevent us from traveling to London,” say the authors of the study. “To get consumers to take risks – still – the airlines offer discounts for advance purchase. As a result the price of tickets increases the closer the flight date,” they explain.
The dynamics of the ideal pricing strategy depends on the interaction of individual demand, uncertainty and risk to skimp. In contrast, the risk of sparing depends on the comparison of demand and supply, and therefore the ability of the seller. Differences in dynamic pricing can be explained by differences in ability. Marc Möller and Makoto Watanabe show that discounts for early purchase will be used by vendors with a relatively small capacity compared to demand, while the settlements are optimal when the capacities are higher. Therefore, differences in ticket prices and tickets can be explained by the fact that flights to London are a relatively small market, while tickets to musicals that have long been in the West End of London is probably not exhausted.
This article also shows that it is more likely to abide by the payments that advance purchase discounts in markets where prices can be committed in advance, temporary capacity limits are difficult to implement and resale is feasible. These results provide further explanations for observed differences in prices.
Furthermore, in its ongoing investigation, Makoto Watanabe has found evidence that air tickets are at their lowest price about eight weeks before the date of travel, although this empirical work has not yet been published in a scientific journal. Furthermore, it appears that tickets are cheaper if purchased in the afternoon instead of morning. “Distinguish between the airline business travelers who book their tickets at work and leisure travelers who book at home? This question will be answered in future research.