Small, Lean, and with Prices that Increase over Time
Columbia Business School
Columbia University, New York, NY 10027
Leon Recanati Graduate School of Business Administration
Tel Aviv University, Tel Aviv, Israel 69978
Naufel J. Vilcassim
London Business School
London, England NW1 4SA
Centre for Marketing Working Paper
Revised September 2004
We are grateful to Stellios Haji-Ioannou, and to John Stephenson, and Ben Meyer at easyJet
for making the data available for analysis, and to Asim Ansari, Don Lehmann, Rajeev Tyagi,
the editor and two reviewers for thoughtful comments and suggestions. The authors would
also like to thank Hernan Bruno for his excellent research assistance.
easyJet is a registered trademark.
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easyJetAirlines: Small, Lean, and with Prices that Increase over Time
easyJet® Airlines, which has emerged as one of Europe’s most successful low-cost, shorthaul airlines, has a simple pricing structure. For a given flight, all prices are quoted oneway, a single price prevails at any point, and in general, prices are low early on and
increase as the departure date approaches. In this paper, we examine the optimality of this
pricing scheme and analyze the factors that determine how the price should change over
time by building a model of dynamic pricing that incorporates demand uncertainty.
We find that while a pricing strategy such as easyJet’s is indeed profit-maximizing, the
magnitude of the increase in price from the first date of seat sales to the departure time is
dependent upon the capacity of available seats between the given city pair, and varies
inversely with it.