Bidding behavior on international airline routes: Exploring passenger psychology and strategies

Abstract

This study examined "seat bidding" services that represent a distinctive method for upgrading airline seats. Such upgrade opportunities were traditionally reserved for VIP members with significant accumulated mileage or provided in cases of overbooking. In contrast, seat bidding enables airlines to offer unsold premium cabin seats (e.g., business class or premium economy) to passengers who have already purchased economy or premium economy tickets. This is done through a bidding competition that takes place before takeoff. The two formats for bidding include single and multiple bids, which permit bid amount modifications within specific time frames. This study simulated bidding scenarios by creating static (single bid) and dynamic (multiple bids) environments. Using the IHS Double-Hurdle model for estimation, the study seeks to understand respondents' willingness to pay and intentions to participate in seat bidding. The findings indicate that five variables—travel purpose, minimum bid price, price difference, economy class price, and premium cabin price—affected the respondents' decisions to participate in seat bidding. Notably, the three price-related variables (minimum bid price, price difference, and economy class price) illustrate that price was the primary factor affecting respondents’ consideration of this marketing activity.