Price discrimination in the airline market: the effect of market concentration
AbstractEconomic theory suggests that a monopolist can price discriminate more successfully than can a perfectly competitive firm. Most real-life markets, however, fall somewhere in between the two extremes. What happens as the market becomes more competitive: Does price discrimination increase or decrease? This paper examines how price discrimination changes with market concentration in the airline market. The paper uses data on prices and ticket restrictions across various routes within the United States, controlling for distances and airport gate restrictions. Price discrimination is found to increase as the markets become more competitive.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Working Papers with number 96-7.
Date of creation: 1996
Date of revision:
Publication status: Published in Review of Economics and Statistics 83, no. 1 (February 2001).
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