The determinants of hidden-city ticketing: Competition, hub-and-spoke networks, and advance-purchase requirements

Luttmann, Alexander and Gaggero, Alberto A (2022): The determinants of hidden-city ticketing: Competition, hub-and-spoke networks, and advance-purchase requirements.

Abstract

We offer a comprehensive empirical study on hidden-city ticketing (HCT), a pricing phenomenon in the airline industry that occurs when the fare for a nonstop trip from A to B is more expensive than a connecting trip from A to B and B to C. Exploiting a unique panel of over 473 thousand fares for flights departing between October 1st, 2019 and December 31st, 2019, we find that HCT depends on route competition (both on A-B and A-C routes), largely occurs in the last week to departure, is less likely when airport C is a hub, and primarily occurs on carriers that operate large hub-and-spoke networks (e.g., American, Delta, and United).

• Item Type: MPRA Paper
• Language: English
• Keywords: advance-purchase, airline pricing, competition, hidden-city ticketing, hub airports, price discrimination
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation

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