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Fare dispersions in airline markets: A quantitative assessment of theoretical explanations

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  • Alderighi, Marco
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    Abstract

    There are substantial fare dispersions in the airline industry. There are various theoretical explanations of this, but they only provide a qualitative justification of the phenomenon. This paper simulates the quantitative outcome of three popular models to evaluate their ability to generate substantial fare dispersions. We find that, in duopoly, the maximum fare dispersion that each model can generate is quite limited; and, even for the most favourable case, it is about one-third of the observed fare variability. Moving to more competitive market structures, however, some models generate better results.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0969699709000490
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Air Transport Management.

    Volume (Year): 16 (2010)
    Issue (Month): 3 ()
    Pages: 144-150

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    Handle: RePEc:eee:jaitra:v:16:y:2010:i:3:p:144-150

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    Web page: http://www.journals.elsevier.com/journal-of-air-transport-management/

    Related research

    Keywords: Airline industry; Fare dispersion; Simulated results;

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    Cited by:
    1. Marco Alderighi & Marcella Nicolini & Claudio A. Piga, 2012. "Combined Effects of Load Factors and Booking Time on Fares: Insights from the Yield Management of a Low-Cost Airline," Quaderni di Dipartimento 171, University of Pavia, Department of Economics and Quantitative Methods.
    2. Escobari, Diego & Mellado, Cristhian, 2013. "The Choice of Airport, Airline, and Departure Date and Time: Estimating the Demand for Flights," MPRA Paper 47943, University Library of Munich, Germany.
    3. Diego, Escobari, 2014. "Estimating Dynamic Demand for Airlines," MPRA Paper 55408, University Library of Munich, Germany.

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