Temporal Distance and Price Elasticity: Empirical Investigation of the Cruise Industry
57 Pages Posted: 15 Jul 2015 Last revised: 10 Sep 2017
Date Written: September 9, 2017
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
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