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Full-Text Articles in Social and Behavioral Sciences
Bundling In Advance Sales: Theory And Evidence From Round-Trip Versus Two One-Way Tickets*, Diego Escobari, Paan Jindapon, Nicholas G. Rupp
Bundling In Advance Sales: Theory And Evidence From Round-Trip Versus Two One-Way Tickets*, Diego Escobari, Paan Jindapon, Nicholas G. Rupp
Economics and Finance Faculty Publications and Presentations
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.