Airline Fuel Hedging and Ticket Prices

主讲人: Qihong Liu
主讲人简介:

Associate Professor, University of Oklahoma.

Upload/File/2019/5/20190523024935587.pdf

主持人: Chao Ma
简介:

Major U.S. airlines rely on hedging to reduce the volatility of jet fuel costs across time. Depending on the hedging outcomes, fuel costs can vary (sometimes significantly) across airlines at a given time. Hedging gain/loss comes in the form a lump sum amount, and does not affect airlines’ marginal cost. Consequently hedging gain/loss should not affect airlines’ ticket pricing decisions. Yet we find that hedging gain/loss, which affects the accounting cost but not true economic cost of fuel, impacts ticket prices significantly (both statistically and economically). Our results suggest that airlines, when making ticket pricing decision , use accounting cost instead of economic cost (the true opportunity cost) of fuel. This can also be interpreted as sunk cost fallacy since the hedging gain/loss is sunk at the time of ticket pricing decisions. We then look for and test alternative explanations.

时间: 2019-05-30(Thursday)16:40-18:00
地点: N302, Econ Building
类型: 系列讲座
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