6 ms·

Testing for common sense violation in airline pricing

47 points by kachnuv_ocasek 11y ago

paulsutter 11y ago
"Common sense" tells us that air ticket pricing will be heavily optimized to maximize airline yield and that no effort is made to conform to any naive buyer conveniences or expectations. Although the data is interesting, the premise of this paper is a little weird.
- bengali3 11y ago
  Agreed, I think the assumption that ticket price is somehow related to cost is the violation here.
aeijdenberg 11y ago
The article looks at common sense from the passenger point of view, but in fact if you look at it from an airline point of view you can sometimes see a very different picture. For example, take the following 2 principles, each of which make sense individually: 1. A non-stop product from A to B is a superior to a one-stop product from A to B. Therefore, A to B non-stop is priced higher. 2. If only one airline has a non-stop product from A to B, they will price it higher than if multiple airlines have a non-stop product from A to B. Let's see how this can play out in practice: If many airlines can offer a one-stop product from A->B, your airline will offer it cheaply to compete. It may just so happen, as an implementation detail, that your product happens to connect at C since that's your hub. Now, if you look at the A->C market, you may have the only non-stop product, and thus you price it high. Result, your price for an itinerary (remember the actual itinerary is an implementation detail of the A->B one-stop product you purchased) from A->C->B is priced much lower than the person sitting next to you that is travelling from A->C only, even though the direct fuel cost to the airline of A->C->B is clearly higher than A->C only.
imechura 11y ago
I'm curious how this was funded. If the authors had asked most anyone involved in Airline reservation management they would have told them this plain and simple as it is no secret. Yield management and airline network dynamics are just some of the drivers for these "common sense violations". Also just to correct another comment on how often fares change. For international flights airlines can publish new fares to ATPCO up to 10 times per day however with newer pricing strategies/technologies such as bid-price the fares can change to meet the demand curve in near realtime. Airline pricing and revenue management is a very complex and interesting topic that has always pushed the envelope of technology and business management. There is a reason why google purchased ITA. I was really excited to see a paper on the topic post on HN but in the end this study has very little substance to add to the many bodies of work out there.
ColinWright 11y ago
Some of these violations are common and ubiquitous. It's been well-known for decades that the UK train fares are not a metric, for a time even failing all three properties: * Splitting tickets at an intermediate station sometimes reduced the total fare, so p(A,B)+p(B,C)<p(A,C); * Reverse journeys are not always the same price, so p(A,B)!=p(B,A); and * For a time it was necessary to purchase a platform ticket to enter the station proper, so p(A,A)!=0. Even now I save thousands of pounds a year by finding optimal split ticket journeys, some of which take (partial) advantage of advance fare discounts. So I'm not surprised, and no longer think of common sense as something to be expected from fare structures.
- SilasX 11y ago
  The 2nd and 3rd there are not economically unreasonable, and the 3rd isn't metric-violating. The 2nd would make sense if the net demand to go one way is greater than the other (think about moving trucks going from Detroit to San Francisco and vice versa). The 3rd is the charge to go from outside the platform to inside it, not to stay in the same place. Whatever criticism you might make of the practice, the two A's are not the same. Edit: And, FWIW, in case anyone hasn't heard the explanation, the "hidden city ticketing" in the first case exists when a provider with A-B routes and B-C routes wants to compete with a direct A-C provider and has to make the sum of the two legs (which takes more time) cost less than the direct, since it's necessarily less convenient, requiring them to vigorously scout for people who get off at B.
- jb17 11y ago
  How do you find the optimal split?
  - ColinWright 11y ago
    Start by deciding on acceptable routes. Here's a graphic of a recent journey I computed: http://www.solipsys.co.uk/images/Route_HOO_HWY.png http://www.solipsys.co.uk/images/Route_HOO_HWY.png Choose your date and time window for travel. Then for every leg, download possible times and prices. Finally, simple search for the optimal combination. You don't have contact details in your profile, but if you email me I can send you more details. I'm extremely busy just now, but if we establish contact I can send you relevant things in slow time. Let me know.
kaffeemitsahne 11y ago
"Testing for common sense violation" is the best thing I've read in a paper title in a while.
neves 11y ago
Nice, now how can I use it to get a better fare? I see that I should: * search for the round trip even if I go in just one direction * try to buy each connection separately if I have time to spare (maybe using multicity). Any more tips? Is there a nice system that would automate it for me?
- redblacktree 11y ago
  Here you go: https://skiplagged.com/ https://skiplagged.com/ That site is based around booking flights with a connection at your destination and skipping the rest of the trip. Just remember not to check any bags! Edit: It's called a "hidden city" fare.
  - mjn 11y ago
    Two other caveats: Don't book a round-trip ticket like this, only one-way. The airline will usually cancel the return ticket if you skip part of the outgoing one. Don't book on an airline where you have frequent-flyer miles you want to keep. In the past few years they're cracking down more by cancelling the accounts of people who use booking tricks that violate their policy.
    - rndstr 11y ago
      > The airline will usually cancel the return ticket if you skip part of the outgoing one. I recently did just that, buy a round-trip ticket with a stopover where on the way out I skipped the last leg. The return leg wasn't cancelled. I would've been furious if that happened, I paid for that and basically saved them money on the skipped leg.
      - mjn 11y ago
        I'd guess you either got lucky then, or it didn't look suspicious to them (e.g. your first time doing it, or there wasn't a huge fare difference from the ticket you "should've" bought). It used to be easy to use this trick, but airlines much more often cancel itineraries if you skip a portion now, since the contract terms specifically ban "hidden-city ticketing" and "throwaway ticketing". Was a bit of a brouhaha a few years ago at flyertalk when it started happening. But of course airlines don't disclose what exactly triggers enforcement.

"Common sense" tells us that air ticket pricing will be heavily optimized to maximize airline yield and that no effort is made to conform to any naive buyer conveniences or expectations. Although the data is interesting, the premise of this paper is a little weird.

bengali3 11y ago
Agreed, I think the assumption that ticket price is somehow related to cost is the violation here.

aeijdenberg 11y ago

The article looks at common sense from the passenger point of view, but in fact if you look at it from an airline point of view you can sometimes see a very different picture. For example, take the following 2 principles, each of which make sense individually: 1. A non-stop product from A to B is a superior to a one-stop product from A to B. Therefore, A to B non-stop is priced higher. 2. If only one airline has a non-stop product from A to B, they will price it higher than if multiple airlines have a non-stop product from A to B. Let's see how this can play out in practice: If many airlines can offer a one-stop product from A->B, your airline will offer it cheaply to compete. It may just so happen, as an implementation detail, that your product happens to connect at C since that's your hub. Now, if you look at the A->C market, you may have the only non-stop product, and thus you price it high. Result, your price for an itinerary (remember the actual itinerary is an implementation detail of the A->B one-stop product you purchased) from A->C->B is priced much lower than the person sitting next to you that is travelling from A->C only, even though the direct fuel cost to the airline of A->C->B is clearly higher than A->C only.

imechura 11y ago

I'm curious how this was funded. If the authors had asked most anyone involved in Airline reservation management they would have told them this plain and simple as it is no secret. Yield management and airline network dynamics are just some of the drivers for these "common sense violations". Also just to correct another comment on how often fares change. For international flights airlines can publish new fares to ATPCO up to 10 times per day however with newer pricing strategies/technologies such as bid-price the fares can change to meet the demand curve in near realtime. Airline pricing and revenue management is a very complex and interesting topic that has always pushed the envelope of technology and business management. There is a reason why google purchased ITA. I was really excited to see a paper on the topic post on HN but in the end this study has very little substance to add to the many bodies of work out there.

ColinWright 11y ago

Some of these violations are common and ubiquitous. It's been well-known for decades that the UK train fares are not a metric, for a time even failing all three properties: * Splitting tickets at an intermediate station sometimes reduced the total fare, so p(A,B)+p(B,C)<p(A,C); * Reverse journeys are not always the same price, so p(A,B)!=p(B,A); and * For a time it was necessary to purchase a platform ticket to enter the station proper, so p(A,A)!=0. Even now I save thousands of pounds a year by finding optimal split ticket journeys, some of which take (partial) advantage of advance fare discounts. So I'm not surprised, and no longer think of common sense as something to be expected from fare structures.

SilasX 11y ago
The 2nd and 3rd there are not economically unreasonable, and the 3rd isn't metric-violating. The 2nd would make sense if the net demand to go one way is greater than the other (think about moving trucks going from Detroit to San Francisco and vice versa). The 3rd is the charge to go from outside the platform to inside it, not to stay in the same place. Whatever criticism you might make of the practice, the two A's are not the same. Edit: And, FWIW, in case anyone hasn't heard the explanation, the "hidden city ticketing" in the first case exists when a provider with A-B routes and B-C routes wants to compete with a direct A-C provider and has to make the sum of the two legs (which takes more time) cost less than the direct, since it's necessarily less convenient, requiring them to vigorously scout for people who get off at B.
jb17 11y ago
How do you find the optimal split?
- ColinWright 11y ago
  Start by deciding on acceptable routes. Here's a graphic of a recent journey I computed: http://www.solipsys.co.uk/images/Route_HOO_HWY.png http://www.solipsys.co.uk/images/Route_HOO_HWY.png Choose your date and time window for travel. Then for every leg, download possible times and prices. Finally, simple search for the optimal combination. You don't have contact details in your profile, but if you email me I can send you more details. I'm extremely busy just now, but if we establish contact I can send you relevant things in slow time. Let me know.

kaffeemitsahne 11y ago

"Testing for common sense violation" is the best thing I've read in a paper title in a while.

neves 11y ago

Nice, now how can I use it to get a better fare? I see that I should: * search for the round trip even if I go in just one direction * try to buy each connection separately if I have time to spare (maybe using multicity). Any more tips? Is there a nice system that would automate it for me?

redblacktree 11y ago
Here you go: https://skiplagged.com/ https://skiplagged.com/ That site is based around booking flights with a connection at your destination and skipping the rest of the trip. Just remember not to check any bags! Edit: It's called a "hidden city" fare.
- mjn 11y ago
  Two other caveats: Don't book a round-trip ticket like this, only one-way. The airline will usually cancel the return ticket if you skip part of the outgoing one. Don't book on an airline where you have frequent-flyer miles you want to keep. In the past few years they're cracking down more by cancelling the accounts of people who use booking tricks that violate their policy.
  - rndstr 11y ago
    > The airline will usually cancel the return ticket if you skip part of the outgoing one. I recently did just that, buy a round-trip ticket with a stopover where on the way out I skipped the last leg. The return leg wasn't cancelled. I would've been furious if that happened, I paid for that and basically saved them money on the skipped leg.
    - mjn 11y ago
      I'd guess you either got lucky then, or it didn't look suspicious to them (e.g. your first time doing it, or there wasn't a huge fare difference from the ticket you "should've" bought). It used to be easy to use this trick, but airlines much more often cancel itineraries if you skip a portion now, since the contract terms specifically ban "hidden-city ticketing" and "throwaway ticketing". Was a bit of a brouhaha a few years ago at flyertalk when it started happening. But of course airlines don't disclose what exactly triggers enforcement.