Allocating Capacity Among Quality Differentiated Products: Evidence From Airline Industry

Prior analytical literature has shown that the capacity-allocation decisions depend on the quality differentiation and the resource consumptions of products. However, there has been no empirical investigation on this topic in vertically differentiated markets. In this article, the authors investigate the airline industry in three regions of the world; Asia Pacific, Europe, Middle East, and Africa, and North America. They explore how the customer perceived quality and the resource-consumption differences of the products may affect the capacity-allocation decisions. They find that both attributes have a significant impact in all the regions, yet at a different scale in each region.