Testing for common sense (violation) in airline pricing or how complexity asymmetry defeated you and the web

TL;DR

This study analyzes over 1.4 million flight prices to reveal frequent violations of common sense expectations in airline pricing, such as higher single-leg prices and unbundled fares being cheaper, highlighting complex pricing asymmetries.

Contribution

It provides a large-scale empirical analysis of airline fares, exposing prevalent pricing anomalies and challenging assumptions about cost structures and bundling in airline ticketing.

Findings

Up to 24.5% of fares violate the expectation that longer routes are more expensive.

Up to 37% of fares show that unbundled tickets can be cheaper than bundled ones.

7.5% of multicity fares are more expensive than back-to-back tickets with short transit times.

Abstract

We have collected and analysed prices for more than 1.4 million flight tickets involving 63 destinations and 125 airlines and have found that common sense violation i.e., discrepancies between what consumers would expect and what truly holds for those prices, are far more frequent than one would think. For example, oftentimes the price of a single leg flight is higher than two-leg flights that include it under similar terms of travel (class, luggage allowance, etc.). This happened for up to 24.5% of available fares on a specific route in our dataset invalidating the common expectation that "further is more expensive". Likewise, we found several two-leg fares where buying each leg independently leads to lower overall cost than buying them together as a single ticket. This happened for up to 37% of available fares on a specific route invalidating the common expectation that "bundling saves money". Last, several single stop tickets in which the two legs were separated by 1-5 days (called multicity fares), were oftentimes found to be costing more than corresponding back-to-back fares with a small transit time. This was found to be occurring in up to 7.5% fares on a specific route invalidating that "a short transit is better than a longer one".