Temporal Distance and Price Elasticity: Empirical Investigation of the Cruise Industry

57 Pages Posted: 15 Jul 2015 Last revised: 10 Sep 2017

Mingyu Joo

University of California, Riverside - School of Business

Kenneth C. Wilbur

University of California, San Diego (UCSD) - Rady School of Management

Dinesh K. Gauri

Walton College of Business

Date Written: September 9, 2017

Abstract

The conventional view of advance-sales industries is that aggregate demand becomes less price- elastic as the advance sales period proceeds. This view has substantial empirical support but is based on analyses of data from a single industry: air travel. We explore how the response of demand to price changes with temporal distance in a large, proprietary dataset of Florida cruise prices, bookings, product attributes and advertising. We offer the first evidence that, unlike the airline-based conventional wisdom, cruise demand becomes more sensitive to price during the advance sales period. The pattern is large enough to appear in data visualizations and replicates across models, parameterizations and partitions of the data.

Keywords: Advance Sales, Cruise, Price Elasticity, Temporal Distance

Suggested Citation

Joo, Mingyu and Wilbur, Kenneth C. and Gauri, Dinesh K., Temporal Distance and Price Elasticity: Empirical Investigation of the Cruise Industry (September 9, 2017). Available at SSRN: https://ssrn.com/abstract=2630858 or http://dx.doi.org/10.2139/ssrn.2630858

Mingyu Joo (Contact Author)

University of California, Riverside - School of Business ( email )

900 University Ave.
Riverside, CA 92521
United States

HOME PAGE: http://www.mingyujoo.com

Kenneth C. Wilbur

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

HOME PAGE: http://kennethcwilbur.com

Dinesh K. Gauri

Walton College of Business ( email )

Fayetteville, AR 72701
United States

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