Wadud, Z (2015) Imperfect reversibility of air transport demand: effects of air fare, fuel prices and price transmission. Transportation Research Part A: Policy and Practice, 72. 16 - 26. ISSN 0965-8564
Abstract
There are recent evidence that air transport demand may not have a perfectly reversible relationship with income and jet fuel prices, as is assumed in most demand models. However, it is not known if the imperfectly reversible effects of jet fuel price are a result of asymmetries in the supply side, i.e., asymmetries in cost pass through from fuel prices to air fare, or of demand side behavioral asymmetries whereby people value gains and losses differently. This paper uses US time series data and decomposes air fare and fuel price into three component series to develop an econometric model of air transport demand that is capable of capturing the potential imperfectly reversible relationships and test for the presence or absence of reversibility. We find that air transport demand shows asymmetry with respect to air fare, indicating potential imperfect reversibility in consumer behavior. We also find evidence of asymmetry and hysteresis in cost pass-through from jet fuel prices to air fare, showing rapid increases in airfare when fuel prices increases but a slower response in the opposite direction.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2015. Elsevier. Uploaded in accordance with the publisher's self-archiving policy. NOTICE: this is the author’s version of a work that was accepted for publication in Transportation Research Part A: Policy and Practice. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in , 95,Transportation Research Part A: Policy and Practice(2015) DOI:10.1016/j.tra.2014.11.005 |
Keywords: | Air transport demand; Asymmetric response; Cost pass-through; Hysteresis; Price transmission; Reversibility |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Engineering & Physical Sciences (Leeds) > School of Chemical & Process Engineering (Leeds) > Energy Research Institute (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 26 Mar 2015 16:01 |
Last Modified: | 16 Jan 2018 16:54 |
Published Version: | http://dx.doi.org/10.1016/j.tra.2014.11.005 |
Status: | Published |
Publisher: | Elsevier |
Refereed: | Yes |
Identification Number: | 10.1016/j.tra.2014.11.005 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:83855 |