The Impact of Loss Aversion and Diminishing Sensitivity on Airline Revenue: Price Sensitivity in Cabin Classes

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dc.contributor.authorNicolau, Juan Luisen
dc.contributor.authorShin, Hakseungen
dc.contributor.authorKim, Boraen
dc.contributor.authorO'Connell, John F.en
dc.date.accessioned2024-07-11T19:27:29Zen
dc.date.available2024-07-11T19:27:29Zen
dc.date.issued2022-05-11en
dc.description.abstractWhile most businesses actively adopt a data-driven approach for revenue management decisions, understanding how air travelers perceive and behave differently to pricing strategies is essential for yielding optimal financial outcomes. This study analyzes the loss aversion and diminishing sensitivity mechanisms of prospect theory in economy and business cabin classes. With rich longitudinal airfares, regression models and revenue data (15,868 observations from the top-10 aviation routes in the world) from 2014 to 2019, this study finds that lower-(higher-)than-expected airfares have a positive (negative) impact on revenue. When the effect of loss-coded and gain-coded tickets were compared, the extent to which passengers avoided losses (vs. welcomed gains) had a greater impact on revenue, supporting that loss aversion applies to the airline revenue, especially for business passengers. This study contributes to the further refinement of prospect theory by showing that the loss aversion and diminishing sensitivity mechanisms manifest differently in each cabin class.en
dc.description.versionAccepted versionen
dc.format.extent14 page(s)en
dc.format.mimetypeapplication/pdfen
dc.identifierARTN 00472875221093014 (Article number)en
dc.identifier.doihttps://doi.org/10.1177/00472875221093014en
dc.identifier.eissn1552-6763en
dc.identifier.issn0047-2875en
dc.identifier.issue3en
dc.identifier.orcidNicolau Gonzalbez, Juan [0000-0003-0048-2823]en
dc.identifier.urihttps://hdl.handle.net/10919/120653en
dc.identifier.volume62en
dc.language.isoenen
dc.publisherSageen
dc.relation.urihttp://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000798305300001&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=930d57c9ac61a043676db62af60056c1en
dc.rightsCreative Commons Attribution 4.0 Internationalen
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/en
dc.subjectairline industryen
dc.subjectcabin classen
dc.subjectloss aversionen
dc.subjectprice sensitivityen
dc.subjectprospect theoryen
dc.subjectrevenue managementen
dc.titleThe Impact of Loss Aversion and Diminishing Sensitivity on Airline Revenue: Price Sensitivity in Cabin Classesen
dc.title.serialJournal of Travel Researchen
dc.typeArticle - Refereeden
dc.type.dcmitypeTexten
dc.type.otherArticleen
dcterms.dateAccepted2022-01-17en
pubs.organisational-group/Virginia Techen
pubs.organisational-group/Virginia Tech/Pamplin College of Businessen
pubs.organisational-group/Virginia Tech/Pamplin College of Business/Hospitality and Tourism Managementen
pubs.organisational-group/Virginia Tech/All T&R Facultyen
pubs.organisational-group/Virginia Tech/Pamplin College of Business/PCOB T&R Facultyen

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