Competitive Pricing Strategies of Low Cost Airlines in the Perspective of Game theory

Price is the weapon of choice for many low cost airlines in the competition for market share. Regional low cost airlines' pricing strategy for market stimulation is issuing free tickets and competing in ticket prices setting. It has been assumed as an effective strategy in influencing customers' purchasing decision. This study has documented the differences in price setting dynamics across low cost airlines operating on one of the biggest regional market and six domestic routes. A total sample of 7883 fare quotes for nonstop travel from Kuala Lumpur to Singapore and 6 domestic routes have been examined. The employment of Granger Causality Test attempts to mathematically capture the competitive behaviour in price setting. The data evidence revealed the reality of price competitiveness among the low cost airlines and game theory suggests that price cooperative should be implemented by low cost airlines for long term sustainability. [ABSTRACT FROM AUTHOR