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This digital document is a journal article from Journal of Air Transport Management, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
The option pricing method is used to analyze the agency problem between airlines and travel agencies. An Airline Agency Option Pricing model is employed whereby different ticket price processes, the quantity targets of tickets sold, the correlation between the ticket price and ticket quantity, and various incentive programs affect the agency costs between airlines and travel agencies. It is found that airlines should cautiously design their incentive programs to mitigate the impact caused by the agency problem that could influence the operations of travel-related suppliers.