Modelling the Air Ticket Purchase Behavior Incorporating Latent Class Model

Abstract

As passengers are proved to be preference heterogeneous in air travel, this paper tries to model the air ticket purchase behavior incorporating market segmentation. In the research, a latent-NL model, established on the latent class structure and the nested logit model, integrates the personal features as well as the purchase preferences into the forecast of segment-specific purchase probability. In order to calibrate the model, a stated preference survey is designed with the choice profiles using real service information, and the survey is conducted in four cities in China for data collection. The results show that the proposed model provides an effective approach for predicting the air travel demand in particular for air ticket pricing, and the estimation results outperforms the traditional-nested logit model with higher goodness-of-fit. Besides, the model is then adopted to test the efficiency of different pricing strategies, showing its advantages in improving the flight revenues.