Institutional Affiliation: Georgia Institute of Technology
|Accounting for Price Endogeneity in Airline Itinerary Choice Models: An Application to Continental U.S. Markets|
with Virginie Lurkin, Laurie A. Garrow, Matthew J. Higgins, Michael Schyns: w22730
Network planning models, which forecast the profitability of airline schedules, support many critical decisions, including equipment purchase decisions. Network planning models include an itinerary choice model that is used to allocate air total demand in a city pair to different itineraries. Multinomial logit (MNL) models are commonly used in practice and capture how individuals make trade-offs among different itinerary attributes; however, none that we are aware of account for price endogeneity. This study formulates an itinerary choice model that is consistent with those used by industry and corrects for price endogeneity using a control function that uses several types of instrumental variables. We estimate our model using a database of more than 3 million tickets provided by the Airli...
Published: Virginie Lurkin & Laurie A. Garrow & Matthew J. Higgins & Jeffrey P. Newman & Michael Schyns, 2017. "Accounting for price endogeneity in airline itinerary choice models: An application to Continental U.S. markets," Transportation Research Part A: Policy and Practice, vol 100, pages 228-246.