Airline market share and customer service quality: a reference-dependent model

Traditional models that explain the nature of the relationship between cust omer service quality and airline demand assume that the relationship can be approximated by using smooth or differentiable curves. Suzuki and Tyworth, however, recently argued that this assumption may not be valid, and that, if it is invalid, the model performance can be improved by using non-smooth functions to represent the relationship (Suzuki, Y., Tyworth, J.E., 1998. A theoretical framework for modeling sales-service relationships in the tra nsportation industry. Transportation Research E 34 (2), 87-100). We use the ir framework to develop a model that represents the relationship between se rvice quality and market share in the airline industry and then empirically compare its performance with conventional airline demand models. The resul ts indicate that the relationship is characterized by a non-smooth curve an d that our model provides a significantly better goodness of fit than other conventional demand models. (C) 2001 Elsevier Science Ltd. All rights rese rved.