Featured Research

from universities, journals, and other organizations

Book flights in advance and purchase theater tickets at the last minute to save money

Date:
September 22, 2010
Source:
Universidad Carlos III de Madrid - Oficina de Información Científica
Summary:
Do you fancy watching a musical in London? Then, according to a new research study if you want to save money you should buy your airline ticket long in advance, but postpone the purchase of your theater ticket until the last minute.

Do you fancy watching a musical in London? Then, according to a research study at the Universidad Carlos III de Madrid (UC3M) if you want to save money you should buy your airline ticket long in advance, but postpone the purchase of your theater ticket until the last minute.

Why do airline tickets become more expensive as the travel date approaches whereas theater tickets are sold at half price in Leicester Square on the day of the performance? In their recent article published in the Economic Journal, titled "Advance Purchase Discounts versus Clearance Sales", Professors Marc Möller and Makoto Watanabe from the UC3M Department of Economics have considered the pricing of products that can be purchased in advance, i.e., long before their actual date of consumption. Further examples include seasonal products like the newest skiing equipment or entry slots for marathons.

According to the study, there are two determining factors for optimal planning for prices. On the one hand, when purchasing early, consumers face uncertainty with respect to their own future demands. "When we reserve our flight to London weeks ahead we have to take into account the possibility that unforeseen circumstances could keep us from traveling to London," the study's authors explained. "In order to make consumers take their chances, airlines have to offer advance purchase discounts. As a consequence ticket prices increase as the travel date approaches," they added.

On the other hand, when purchasing late, consumers face the risk of becoming rationed. When we purchase our theater ticket last minute, there exists the possibility that the event has sold out. In order to make consumers bear this risk, theaters implement a clearance sale by offering last minute discounts. As a consequence ticket prices decrease on the day of the performance

The optimal dynamic pricing strategy depends on the interplay between individual demand uncertainty and rationing risks. In turn, rationing risks depend on a comparison of demand and supply and hence on the seller's capacity. Differences in dynamic pricing can therefore be explained by differences in capacities. Marc Möller and Makoto Watanabe show that advance purchase discounts will be employed by sellers whose capacity is relatively small in comparison to demand whereas Clearance Sales are optimal when capacities are large. Hence differences in the pricing of airline and theater tickets can be explained by the fact that air travel to London is a relatively tight market while the long running musicals of London's West End are very unlikely to become sold out.

The article shows further that clearance sales are more likely and advance purchase discounts are less likely to be observed in markets where prices can be committed to in advance, temporal capacity limits are difficult to implement, and resale is feasible. These results provide further reason for the observed differences in pricing.

In addition, in his ongoing research Makoto Watanabe has found evidence which shows that air fares are lowest around eight weeks before the travel date. Moreover, it seems as if tickets are cheaper when purchased in the afternoons, rather than the mornings. Do airlines price discriminate between business travelers who book their tickets at work and leisure travelers who book from home? This claim still has to be confirmed in future research.


Story Source:

The above story is based on materials provided by Universidad Carlos III de Madrid - Oficina de Información Científica. Note: Materials may be edited for content and length.


Journal Reference:

  1. Marc Möller, Makoto Watanabe. Advance Purchase Discounts versus Clearance Sales. The Economic Journal, 2009; DOI: 10.1111/j.1468-0297.2009.02324.x

Cite This Page:

Universidad Carlos III de Madrid - Oficina de Información Científica. "Book flights in advance and purchase theater tickets at the last minute to save money." ScienceDaily. ScienceDaily, 22 September 2010. <www.sciencedaily.com/releases/2010/09/100922081752.htm>.
Universidad Carlos III de Madrid - Oficina de Información Científica. (2010, September 22). Book flights in advance and purchase theater tickets at the last minute to save money. ScienceDaily. Retrieved July 23, 2014 from www.sciencedaily.com/releases/2010/09/100922081752.htm
Universidad Carlos III de Madrid - Oficina de Información Científica. "Book flights in advance and purchase theater tickets at the last minute to save money." ScienceDaily. www.sciencedaily.com/releases/2010/09/100922081752.htm (accessed July 23, 2014).

Share This




More Mind & Brain News

Wednesday, July 23, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Huge Schizophrenia Study Finds Dozens Of New Genetic Causes

Huge Schizophrenia Study Finds Dozens Of New Genetic Causes

Newsy (July 22, 2014) — The 83 new genetic markers could open dozens of new avenues for schizophrenia treatment research. Video provided by Newsy
Powered by NewsLook.com
Why Do People Believe We Only Use 10 Percent Of Our Brains?

Why Do People Believe We Only Use 10 Percent Of Our Brains?

Newsy (July 22, 2014) — The new sci-fi thriller "Lucy" is making people question whether we really use all our brainpower. But, as scientists have insisted for years, we do. Video provided by Newsy
Powered by NewsLook.com
Do Obese Women Have 'Food Learning Impairment'?

Do Obese Women Have 'Food Learning Impairment'?

Newsy (July 18, 2014) — Yale researchers tested 135 men and women, and it was only obese women who were deemed to have "impaired associative learning." Video provided by Newsy
Powered by NewsLook.com
Does Mixing Alcohol and Energy Drinks Boost Urge To Drink?

Does Mixing Alcohol and Energy Drinks Boost Urge To Drink?

Newsy (July 18, 2014) — A new study suggests that mixing alcohol with energy drinks makes you want to keep the party going. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins