Taylor, Lisa (2012-02). Time to Buy: Determining How Airfares Vary with Purchase Day of the Week. Master's Thesis.
In this paper, I empirically identify a new source of price discrimination utilized by airlines, namely, price discrimination based on the day of the week a ticket is purchased. Using unique transaction data, I compare tickets that are identical in every aspect except day of the week purchased (that is, traveling on the same date on the same route on the same airline with the same restrictions on flights with the same load factors and purchased the same number of days in advance), and find that airfares are cheapest when bought on the weekend. The size of this weekend purchase effect varies with distribution channel (online or offline) and how far in advance of departure the ticket is purchased. For transactions occurring more than two weeks before the departure date, offline weekend purchases are 3% cheaper than those made on weekdays, but online purchase prices do not differ significantly throughout the week. Conversely, in the final two weeks before departure, weekend purchases are 4% less expensive online but not significantly cheaper offline. These findings are consistent with price discrimination between high-elasticity leisure customers and low-elasticity business customers. If airlines believe that weekend purchasers are more likely to be price-elastic leisure travelers, then they may offer lower prices or make deals more transparent on the weekend. This conjecture is supported by the finding that the weekend purchase effect is generally larger on routes with a mixture of both business and leisure customers than on routes primarily traveled by leisure customers because price discrimination is both possible and effective on these heterogeneous routes.