Computing airfare elasticities or opening Pandora's box

Research output: Contribution to journalArticle

14 Citations (Scopus)

Abstract

Airfare elasticities are crucial for policy instruments for the stakeholders of tourism industry. Modellers attempting to estimate these elasticities face several challenges in the absence of microeconomic data on consumer preferences. The aim of this paper is to offer a critical analysis of the practice of computing airfare elasticities from tourism demand studies. It identifies and discusses potential sources of measurement errors in the data and drawbacks that investigators face and assesses their implications for the estimated parameters in the respective models. The use of price of crude oil and distance between origin and destination as proxies for transportation costs are evaluated. It is recommended that authors be more systematic in reporting their results. They need to comment on the limitations of their elasticity estimates since these have repercussions on policy recommendations made based on their results. © 2009 Elsevier Ltd. All rights reserved.
LanguageEnglish
Pages27-36
Number of pages10
JournalResearch in Transportation Economics
Volume26
Issue number1
DOIs
Publication statusPublished - 2010
Externally publishedYes

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Elasticity
Tourism
crude oil
microeconomics
stakeholder
industry
demand
costs
Measurement errors
Crude oil
Airfare
Costs
Industry

Cite this

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abstract = "Airfare elasticities are crucial for policy instruments for the stakeholders of tourism industry. Modellers attempting to estimate these elasticities face several challenges in the absence of microeconomic data on consumer preferences. The aim of this paper is to offer a critical analysis of the practice of computing airfare elasticities from tourism demand studies. It identifies and discusses potential sources of measurement errors in the data and drawbacks that investigators face and assesses their implications for the estimated parameters in the respective models. The use of price of crude oil and distance between origin and destination as proxies for transportation costs are evaluated. It is recommended that authors be more systematic in reporting their results. They need to comment on the limitations of their elasticity estimates since these have repercussions on policy recommendations made based on their results. {\circledC} 2009 Elsevier Ltd. All rights reserved.",
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Computing airfare elasticities or opening Pandora's box. / Seetaram, Neelu.

In: Research in Transportation Economics, Vol. 26, No. 1, 2010, p. 27-36.

Research output: Contribution to journalArticle

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