A regression model for predicting optimal purchase timing for airline tickets

Date of Submission: 
October 18, 2011
Report Number: 
11-025
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Abstract: 
Optimal timing for airline ticket purchasing from the consumer's perspective is challenging principally because buyers have insufficient information for reasoning about future price movements. This paper presents a model for computing expected future prices and reasoning about the risk of price changes. The proposed model is used to predict the future expected minimum price of all available flights on specific routes and dates based on a corpus of historical price quotes. Also, we apply our model to predict prices of flights with specific desirable properties such as flights from a specific airline, non-stop only flights, or multi-segment flights. By comparing models with different target properties, buyers can determine the likely cost of their preferences. We present the expected costs of various preferences for two high-volume routes. Performance of the prediction models presented is achieved by including instances of time-delayed features, by imposing a class hierarchy among the raw features based on feature similarity, and by pruning the classes of features used in prediction based on in-situ performance. Our results show that purchase policy guidance using these models can lower the average cost of purchases in the 2 month period prior to a desired departure. The proposed method compares favorably with a deployed commercial web site providing similar purchase policy recommendations.