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Is Airline Price Dispersion the Result of Careful Planning or Competitive Forces?

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Author Info
Kathy J. Hayes
Leola B. Ross
Abstract

We develop a model of price dispersion to distinguish the impact of price discrimination from that of peak load pricing schemes or atypical competition resulting from the financial difficulties of the early 1990s. By utilizing three alternative measures of dispersion and appealing to economic theory for our specification, we find robust results suggesting an estrangement between price dispersion and price discrimination. While some discrimination continues to persist at monopolized endpoints, most dispersion is associated with fare wars and peak load pricing schemes.

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Publisher Info
Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 13 (1998)
Issue (Month): 5 (October)
Pages: 523-541
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Handle: RePEc:kap:revind:v:13:y:1998:i:5:p:523-541

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Web page: http://www.springerlink.com/link.asp?id=100336

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  1. Kris Gerardi & Adam Hale Shapiro, 2007. "The effects of competition on price dispersion in the airline industry: a panel analysis," Working Papers 07-7, Federal Reserve Bank of Boston. [Downloadable!]
  2. Claudio A. Piga & Enrico Bachis, 2006. "Do Prices grow more in Euroland? Evidence from the Airline Industry," Discussion Paper Series 2006_8, Department of Economics, Loughborough University, revised Nov 2006. [Downloadable!]
  3. Enrico Bachis & Claudio A. Piga, 2006. "Hub Premium, Airport Dominance and Market Power in the European Airline Industry," Rivista di Politica Economica, SIPI Spa, vol. 96(5), pages 11-54, September. [Downloadable!]
    Other versions:
  4. Asplund, Björn Marcus & Eriksson, Rickard & Strand, Niklas, 2002. "Price Discrimination in Oligopoly: Evidence from Swedish Newspapers," CEPR Discussion Papers 3269, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Claudio A. Piga & Enrico Bachis, 2006. "Pricing strategies by European traditional and low cost airlines. Or, when is it the best time to book on line?," Discussion Paper Series 2006_14, Department of Economics, Loughborough University, revised Jul 2006. [Downloadable!]
  6. Alberto A. Gaggero & Claudio A. Piga, 2009. "Airline Market Power and Intertemporal Price Dispersion," Discussion Paper Series 2009_10, Department of Economics, Loughborough University, revised Jul 2009. [Downloadable!]
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