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Investigating the effects of economies of scope on firms' pricing behavior: Empirical evidence from the US domestic airline industry

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  • Hofer, Christian
  • Eroglu, Cuneyt
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    Abstract

    This study investigates to what extent cross-product (belly cargo) output affects (passenger ticket) prices in the US domestic airline industry. The empirical analysis indicates that greater cargo volumes generally result in lower air fares, presumably as a result of the airlines' realization of economies of scope. This magnitude of this price effect, however, depends on certain firm and route market characteristics. The findings of this study add to extant research on economies of scope, multi-product yield management and airline pricing and provide important insights for policy makers and airline managers alike.

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    Bibliographic Info

    Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

    Volume (Year): 46 (2010)
    Issue (Month): 1 (January)
    Pages: 109-119

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    Handle: RePEc:eee:transe:v:46:y:2010:i:1:p:109-119

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    Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description

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    Related research

    Keywords: Economies of scope Belly cargo Airfares Contingency framework US airline industry;

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    Cited by:
    1. Fan, Terence Ping Ching & Tan, Alex Tai Loong & Geng, Xuesong, 2014. "Rapid capacity expansions and failure: A trap for new airline entrants?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 61(C), pages 176-191.

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