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Are Airlines' Price-Setting Strategies Different?

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Author Info

  • Volodymyr Bilotkach
  • Yuriy Gorodnichenko
  • Oleksandr Talavera
  • Igor Zubenko

Abstract

Using a sample of fare quotes for non-stop travel from New York to London, this paper investigates the dynamics of offered fares as the departure date nears. We find that the general trend is toward fare increase at an accelerated rate as the departure date approaches. Clear differences in price-setting strategies among the carriers competing on a particular route are documented.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44910.de/dp645.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 645.

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Length: 12 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp645

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Keywords: airline industry; price dynamics;

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References

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  1. Glenn Ellison & Sara Fisher Ellison, 2005. "Lessons About Markets from the Internet," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 139-158, Spring.
  2. Darin Lee & María José Luengo-Prado, 2005. "The Impact of Passenger Mix on Reported “Hub Premiums” in the U.S. Airline Industry," Southern Economic Journal, Southern Economic Association, vol. 72(2), pages 372–394, October.
  3. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-83, August.
  4. Evans, William N & Kessides, Ioannis N, 1993. "Localized Market Power in the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 66-75, February.
  5. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc.
  6. Shibata, Kyohei, 2001. "Motives for mega-alliance between US ex-trunk carriers and European flag carriers," Journal of Air Transport Management, Elsevier, vol. 7(4), pages 197-206.
  7. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
  8. Volodymyr Bilotkach, 2007. "Asymmetric Regulation and Airport Dominance in International Aviation: Evidence from the London-new York Market," Southern Economic Journal, Southern Economic Association, vol. 74(2), pages 505-523, October.
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Citations

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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," Working Papers 2012.14, Fondazione Eni Enrico Mattei.
  2. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
  3. Escobari, Diego & Lee, Jim, 2013. "Demand Uncertainty and Capacity Utilization in Airlines," MPRA Paper 46059, University Library of Munich, Germany.
  4. Raymond Deneckere & James Peck, 2012. "Dynamic Competition With Random Demand and Costless Search: A Theory of Price Posting," Econometrica, Econometric Society, vol. 80(3), pages 1185-1247, 05.
  5. Mantin, Benny & Koo, Bonwoo, 2009. "Dynamic price dispersion in airline markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(6), pages 1020-1029, November.
  6. Puller, Steven L. & Taylor, Lisa M., 2012. "Price discrimination by day-of-week of purchase: Evidence from the U.S. airline industry," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 801-812.

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