Advanced Search
MyIDEAS: Login to save this paper or follow this series

Dynamic Oligopoly Pricing: Evidence from the Airline Industry

Contents:

Author Info

  • Siegert, Caspar
  • Ulbricht, Robert

Abstract

We explore how pricing dynamics in the European airline industry vary with the competitive environment. Our results highlight substantial variations in pricing dynamics that are consistent with a theory of intertemporal price discrimination. First, the rate at which prices increase towards the scheduled travel date is decreasing in competition, supporting the idea that competition restrains the ability of airlines to price-discriminate. Second, the sensitivity to competition is substantially increasing in the heterogeneity of the customer base, reecting further that restraints on price discrimination are only relevant if there is initial scope for price discrimination. These patterns are quantitatively important, explaining about 83 percent of the total within flight price dispersion, and explaining 17 percent of the observed cross-market variation of pricing dynamics.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.tse-fr.eu/images/doc/by/ulbricht/wp_tse_478.pdf
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 14-478.

as in new window
Length:
Date of creation: 23 Mar 2014
Date of revision:
Handle: RePEc:tse:wpaper:28015

Contact details of provider:
Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/
More information through EDIRC

Related research

Keywords: Airline industry; capacity constraints; dynamic oligopoly pricing; intertemporal price dispersion; price discrimination.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Phillip Leslie, 2004. "Price Discrimination in Broadway Theater," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 520-541, Autumn.
  2. Igal Hendel & Aviv Nevo, 2011. "Intertemporal Price Discrimination in Storable Goods Markets," NBER Working Papers 16988, National Bureau of Economic Research, Inc.
  3. Austan Goolsbee & Chad Syverson, 2005. "How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," NBER Working Papers 11072, National Bureau of Economic Research, Inc.
  4. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics, Springer, vol. 5(3), pages 239-292, September.
  5. Kristopher S. Gerardi & Adam Hale Shapiro, 2009. "Does Competition Reduce Price Dispersion? New Evidence from the Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 1-37, 02.
  6. Pascal Courty & Mario Pagliero, 2009. "The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry," Carlo Alberto Notebooks 105, Collegio Carlo Alberto.
  7. 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.
  8. Escobari, Diego, 2011. "Dynamic Pricing, Advance Sales, and Aggregate Demand Learning in Airlines," MPRA Paper 38509, University Library of Munich, Germany.
  9. Severin Borenstein, 1985. "Price Discrimination in Free-Entry Markets," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 380-397, Autumn.
  10. Kathy J. Hayes & Leola B. Ross, 1998. "Is Airline Price Dispersion the Result of Careful Planning or Competitive Forces?," Review of Industrial Organization, Springer, vol. 13(5), pages 523-541, October.
  11. Gale, Ian L. & Holmes, Thomas J., 1992. "The efficiency of advance-purchase discounts in the presence of aggregate demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 413-437, September.
  12. repec:att:wimass:9005 is not listed on IDEAS
  13. 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," Quaderni di Dipartimento 171, University of Pavia, Department of Economics and Quantitative Methods.
  14. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-50, March.
  15. Gale, Ian L & Holmes, Thomas J, 1993. "Advance-Purchase Discounts and Monopoly Allocation of Capacity," American Economic Review, American Economic Association, vol. 83(1), pages 135-46, March.
  16. Dana, James D, Jr, 2001. "Monopoly Price Dispersion under Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 649-70, August.
  17. Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. "Fare Determination in Airline Hub-and-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn.
  18. James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Diego, Escobari, 2014. "Estimating Dynamic Demand for Airlines," MPRA Paper 55408, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:28015. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.