Airline tickets price discrimination: A new study from Northweastern University

One of the most popular articles in my blog is the one about the outcomes of a study that we conducted in the University of Twente (NL) about the suspected price discrimination of airlines in online sales using cookies. 

 In this sense a study of the colleagues from Northeastern University (Hannak et.al, 2014) published in the IMC 2014 proceedings is a very much welcome  contribution to a topic that keeps most air travelers busy", namely whether airlines (or online travel agents) discriminate when they price their services to different customers. The study called Measuring Price Discrimination and Steering on E-commerce Web Sites" looks to price discrimination from a different perspective than ours with very interesting results. The study is available here.

Despite the immense interest though, the academic journals (even those specialized in air travel) do not seem particularly interested in this kind of studies since they are conflicting with many academic reviewers' mindsets. Some academics do not seem also to understand what are the real topics of their study domain. The paper we wrote following the study was accepted by the EMAC conference last year but rejected by two journals as irrelevant.

In that respect I wish to congratulate the colleagues from Northeastern for their very interesting article and wish them more success than us with the publication of the study. 

For those interested our EMAC Conference the paper is available (email me at e.constantindes@utwente.nl). 

Diercks R., Constantinides E., 2014, Airline price discrimination: a practice of yield management or 

The Airline Cookie Conspiracy Part II

One of the most popular posts for the visitors of this blog is the post about the Airline Cookie Conspiracy. To groups of my students are working on writing a paper where the methodology and results of our experiment will be documented in detail, we hope also to publish at least one of the papers in a scientific journal or conference.  The papers will be also available as working papers as soon as they are ready (around the end of May). If anyone is interested for a copy send an email to e.constantinides@utwente.nl

The airline cookie conspiracy: The myth busted (at least for now)

As I promised in my previous blog post I will reveal today the findings of our research on the issue of airline tickets and customer profiling by means of cookies or other more advanced techniques.
The reason for this research was that the Dutch TV program TROS RADAR came to me with the request to help them give an answer to the question whether airlines are adjusting the prices of flights on the basis of customer profiling. The reason for this question is that many online customers have the idea that prices are changing in a way that can be only explained if the airlines know who you are and discriminate for example against old customers by offering higher prices than prices they offer to new customers. In this case cookies, super-cookies or advanced “device fingerprinting” techniques.
Together with a PhD candidate in my department we did a month-long experiment tracking four airlines with requests for ticket prices from two computers: one computer was a ”normal” device like the one everybody using when surfing the web where all kinds of cookies and other fingerprinting data could be installed and followed up. The second was a “clean” computer with changing IP address and formatted every time before the use so no records of any kind could be traced whatsoever. The requests for prices were sent simultaneously, for the same flights three times a day.
The findings are short of disappointing for the cookie conspiracy theorists: For this particular setting no difference was detected between the two computers indicating that profiling does not play any role here. What we found is that prices can sometimes change within the same day and sometimes dramatically indeed. The experiment was combined with a consumer survey revealing interesting information about peoples’ attitudes on the issue: on the average about 25% of the Dutch consumers are sure that prices of airlines are based on customer information that airlines obtained without their consent and 50% of them are not sure but they think that this is possible. The question of course is: If profiling does not play any role then why prices are changing like this? The answer is Yield Management! Airlines like many other capacity-constrained service industries are using various techniques to utilize their capacity as much as possible. Price discrimination (which is nothing new in the marketing) is one of the tools used in this context.

Is the cookie conspiracy case closed? I don’t think so, this was though the first scientific study on the issue. As such it is of course subject to several limitations. What we can say is that for the four airlines we investigated, for the period of April 2011 and for the specific flights we looked at we found no evidence of price discrimination based on profiling. I can not of course exclude the possibility that this technique is applied for other flights, by other airlines, in other parts of the world. For those interested and speak Dutch they can see the TV show of last night in this link:

http://www.trosradar.nl/uitzending/archief/detail/aflevering/09-05-2011/vliegtickets/

NEW!! Around the end of May 2013) there will be a working paper available describing the study and the results in detail. If you are interested for a copy send me an email in e.constantinides@utwente.nl

The airline cookie conspiracy: The myth investigated

In 2000 Amazon outraged some of its customers when it was revealed that different prices were charged for the same DVDs to customers with different shopping habits. This was the first widely discussed case of online price discrimination by web retailers depending on customer profiling. Since then online shops were often accused of using cookies in order to identify customers and charge them various prices. The discussion reached quite often the mass media where several cases of such practices have been revealed. The issue has been often become the subject of blogs: the airline industry, hotels and travel web sites in particular have been often accused of price discrimination based on customer cookie-based profiling. It is interesting that except Amazon who back in 2000 blamed a price test for the price discrimination and another case of a UK hotel that blamed a mistake in 2009 no online vendor has ever admitted in public that customer cookie-based profiling affects prices offered online.
Despite the mounting anecdotal evidence on the cookie conspiracy I was surprised to find out that no serious scientific research has been ever done on the issue. This while almost everyone of us can talk about an incident of unexplained differences in the price of an airline ticket that we bought online and found out that the neighbor who was flying with us in the same flight had to pay another price: no other explanation than profiling based priced discrimination is usually to blame.
The cookie conspiracy has become one of the web's urban legends and some time ago a consumer advocacy program of the Dutch TV asked me for help to investigate the issue. I am glad to say that together with a PhD student we did a moth-long study to find out whether the myth is true or not, at least in the airline world. Those interested in the answer (and speak Dutch) can see our findings in the TV program TROS Radar next Monday (20:30, May 9) in NL1. Those who will miss the program (or do not speak Dutch) but are interested in the answer must read my next blog post and the research paper we will write about the study.

NEW!! Around the end of May 2013) there will be a working paper available describing the study and the results in detail. If you are interested for a copy send me an email in e.constantinides@utwente.nl