Bundling in Advance Sales: Theory and Evidence from Round-Trip versus Two One-Way Tickets*

Authors

Diego Escobari, The University of Texas Rio Grande ValleyFollow
Paan Jindapon
Nicholas G. Rupp

Document Type

Article

Publication Date

5-2024

Abstract

We theoretically derive an optimal price for a bundle of two goods that are sold in advance to risk-averse buyers. The theory predicts that a round-trip ticket is less expensive than two one-way tickets when demands for the outbound and the inbound are uncertain and positively correlated. Using a unique airlines dataset, we find evidence that is consistent with the theory; round-trip bundle discounts exist and they are larger for passengers who buy early in advance, stay on a Saturday night, and have higher valuations. We also find that the bundle discounts decrease with competition.

Comments

Original published version available at https://doi.org/10.1111/joie.12393

https://onlinelibrary.wiley.com/share/AGXZBMX4MAQGS3CVUGKC?target=10.1111/joie.12393

Recommended Citation

Escobari, D., Jindapon, P. and Rupp, N.G. (2024), Bundling in Advance Sales: Theory and Evidence from Round-Trip versus Two One-Way Tickets†. J Ind Econ. https://doi.org/10.1111/joie.12393

Publication Title

The Journal of Industrial Economics

DOI

10.1111/joie.12393