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Pricing Dynamics in the Australian Airline Market

Author

Listed:
  • NICOLAS DE ROOS
  • GORDON MILLS
  • STEPHEN WHELAN

Abstract

We examine price dispersion in a large dataset of Australian domestic airfares. The airlines vary the lowest available fares on successive booking days by restricting the menu of available ticket types, and by changing the prices for some of those types. Our fixed-effects estimator allows us to characterise both of those mechanisms. The greatest price variation occurs on routes involving competition between the two main airlines, Qantas and Virgin; there is greater variation on monopoly routes than on routes pitting Virgin against the Qantas subsidiary, Jetstar. The lowest fares rise rapidly in the week before travel.

Suggested Citation

  • Nicolas De Roos & Gordon Mills & Stephen Whelan, 2010. "Pricing Dynamics in the Australian Airline Market," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 545-562, December.
  • Handle: RePEc:bla:ecorec:v:86:y:2010:i:275:p:545-562
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    File URL: http://hdl.handle.net/10.1111/j.1475-4932.2010.00653.x
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    References listed on IDEAS

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    Cited by:

    1. David Gillen & Tim Hazledine, 2016. "Pricing of Regional Airline Services in Australia and New Zealand, 2011–2015," Economic Papers, The Economic Society of Australia, vol. 35(2), pages 87-98, June.
    2. Markham, Francis & Young, Martin & Reis, Arianne & Higham, James, 2018. "Does carbon pricing reduce air travel? Evidence from the Australian ‘Clean Energy Future’ policy, July 2012 to June 2014," Journal of Transport Geography, Elsevier, vol. 70(C), pages 206-214.
    3. Zhang, Yahua & Sampaio, Breno & Fu, Xiaowen & Huang, Zhibin, 2018. "Pricing dynamics between airline groups with dual-brand services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 46-59.
    4. Li, Kai & Long, Cheryl & Wan, Wei, 2019. "Public interest or regulatory capture: Theory and evidence from China’s airfare deregulation," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 343-365.
    5. Domínguez-Menchero, J. Santos & Rivera, Javier & Torres-Manzanera, Emilio, 2014. "Optimal purchase timing in the airline market," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 137-143.
    6. Kai Li & Cheryl Long & Wei Wan, 2019. "Public Interest or Regulatory Capture: Theory and Evidence from China’s Airfare Deregulation," Working Papers 2019-01, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    7. Tim Hazledine, 2011. "Price discrimination in Australasian air travel markets," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 311-324, July.

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    More about this item

    Keywords

    L13 ; L93 ;

    JEL classification:

    • 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

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