Emerging Pricing Strategies on the Web: Lessons from the Airline Industry

The advent of the digital economy has provided unprecedented opportunities for suppliers and intermediaries to experiment with new pricing strategies. New information technologies not only enable businesses to charge flexible prices on the Web, but also allow for new price setting mechanisms in which consumers specify their interests and requirements. Economic appropriateness, technical feasibility, and purposes of such pricing strategies depend mainly on product characteristics, customer groups, sales volume, and eventually the division of labour and power among suppliers, intermediaries, and consumers. This paper compares online and offline pricing strategies. It puts a particular focus on airline ticket sales based in a setting of structural changes in the airline industry and changing customer behaviour. It takes a critical look at predictions about the proliferation and success of flexible pricing schemes that were made at the end of the 1990s. Interpretative analysis and empirical evidence of Web-based pricing mechanisms, which aim at giving customers access to lower prices, lead to envision a scheme for developing pricing strategies that reflect the competitive environment of the online market space.