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<p>The enhancement of products or services often involves the incorporation of distinctive features aimed at increasing their desirability to customers. However, business organizations often lack a systematic and data-informed methodology to estimate the perceived value of these features to consumers, leading to challenges in pricing strategies. Commonly, businesses resort to surveys and expert opinions for pricing decisions. This study proposes an all-encompassing methodology based on discrete choice models to precisely gauge the perceived value of product features, enabling businesses to more accurately set prices accordingly. Applied to a relevant case, we investigate the emergent practice in the airline industry during the COVID-19 pandemic of blocking middle seats for social distancing. Using the DB1B Market Data from the US Bureau of Transportation Statistics, we employ a multinomial logit model to quantify the perceived value of the blocked middle seat to US airline customers, exemplifying the utility of our proposed methodology in informing pricing strategies.</p>

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A discrete choice model to evaluate pricing of product features: valuing blocked middle seats in the US airline industry during the COVID-19 pandemic

  • 期刊论文

  • 发表日期：

    2025年7月29日

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  • Zoe Mehta,
  • Alvin Lim

摘要

The enhancement of products or services often involves the incorporation of distinctive features aimed at increasing their desirability to customers. However, business organizations often lack a systematic and data-informed methodology to estimate the perceived value of these features to consumers, leading to challenges in pricing strategies. Commonly, businesses resort to surveys and expert opinions for pricing decisions. This study proposes an all-encompassing methodology based on discrete choice models to precisely gauge the perceived value of product features, enabling businesses to more accurately set prices accordingly. Applied to a relevant case, we investigate the emergent practice in the airline industry during the COVID-19 pandemic of blocking middle seats for social distancing. Using the DB1B Market Data from the US Bureau of Transportation Statistics, we employ a multinomial logit model to quantify the perceived value of the blocked middle seat to US airline customers, exemplifying the utility of our proposed methodology in informing pricing strategies.