Optimizing for green skies: How do herd effects and customer heterogeneity impact airline optimal pricing and reputation investment?

Key Points

• Optimal pricing strategies can be heavily influenced by herd effects among consumers, leading to varied pricing approaches.
• Heterogeneity in customer preferences necessitates a nuanced approach to reputation investment, impacting overall brand loyalty.
• Modeling these dynamics provides insights into how airlines can better position themselves in competitive markets.
• Understanding these interactions can enable airlines to enhance customer satisfaction while maximizing profitability.