Pricing strategies by European Low Cost Carriers
AbstractWe introduce an on-line pricing tactic where airlines post, at the same time and for the same flight, fares in different currencies that violate the law of One Price. Unexpectedly for an on-line market, we find that price discrimination may be accompanied by arbitrage opportunities and that both tend to persist before a flight’s departure. We find discrimination to be of a competitive type, although arbitrage opportunities are more likely in concentrated routes. Finally, the evidence suggests that discrimination may be used to manage stochastic demand.
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Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_10.
Date of creation: Apr 2007
Date of revision: Apr 2007
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More information through EDIRC
on-line pricing; price discrimination; Law of One Price; sample selection; dispersion; airlines; exchange rate.;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-28 (All new papers)
- NEP-COM-2007-04-28 (Industrial Competition)
- NEP-IFN-2007-04-28 (International Finance)
- NEP-IND-2007-04-28 (Industrial Organization)
- NEP-MIC-2007-04-28 (Microeconomics)
- NEP-MKT-2007-04-28 (Marketing)
- NEP-TUR-2007-04-28 (Tourism Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Salop, Steven, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 393-406, October.
- Pinelopi K. Goldberg & Michael M. Knetter, 1996.
"Goods Prices and Exchange Rates: What Have We Learned?,"
NBER Working Papers
5862, National Bureau of Economic Research, Inc.
- Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
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