An Availability Design to Capture Heterogeneous Decision Rules: a Case Study for Airfare Choice

Abstract

Abstract In choice behaviour studies, decision makers are generally assumed to process all information for each available alternative and can choose by trading-off attributes at the margin. In many choice contexts, decision makers may employ alternative heuristics and we argue that this is likely to apply in airline itinerary choices. A population of choice makers employing multiple decision rules combined with heterogeneous preferences presents an added layer of complexity to the estimation of demand. This study presents an availability stated preference design aimed to differentiate decision rules used decision makers and, subsequently, provide more accurate demand responses. The empirical study reveals that air travellers apply different decision rules when choosing an airfare. Most adopt choice heuristics, such as non-trading (i.e. choosing the same carrier or fare class always) and lexicographic ordering on price. Identification of these rules leads to a better understanding of consumers’ airfare choice behaviour. Ignoring multiple decision rules leads to misguided yield management decisions.