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INTRODUCTION
The key driver for the evolution of airline revenue (or yield) management since the US deregulation in 1978 is the ability to price discriminate. By price discrimination we mean that the seller charges different prices to different buyers for the same goods or service and this difference cannot be explained by cost reasons alone (see Phlips (1983) for a literature overview). The term 'discrimination' has a negative connotation nowadays, however, we state it here as a pure technical term for the fact that there are different prices for different customers and we do not implicate any unethical or illegal behaviour.
Price discrimination can lead to increased efficiency and is tolerated by the public to a certain degree if it is not perceived as too unfair. We believe that the airline industry would not be able to offer its current public service level for both leisure and business customers without it. As the whole industry is permanently operating on low or negative margins, we do not believe that such practices overall extract too much surplus from the customers.
The capabilities for price discrimination in the airline industry go hand in hand with the technical development of computerised distribution and revenue management systems. It is therefore useful to look at this process starting from the early introduction of booking systems or global distribution systems (GDS) for travel agents, up to the use of the Internet under the aspect of the airlines' desire to price discriminate. Specifically the Internet with its interactive link to the customer offers unprecedented new opportunities for differential pricing (see Odlyzko (2003) for an extensive discussion). These websites were pioneered first by the low-cost carriers. However GDS distribution channels still proved to be essential as they are used by the travel agents to distribute products and prices of various subscriber airlines at one location. Booking volumes are generated by the Internet also in the form of e-agents, but the interactivity between airline and customer of those channels is the same as those of the GDS, as the driving engine behind the web page is still the old GDS.
GDS technology, mainly driven by network airlines, developed seamless availability functionalities that offer an enhanced online interactivity between airline and customer and can also be...