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How does COVID-19 affect intertemporal price discrimination and price dispersion? Evidence from the airline industry

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  • Gaggero, Alberto A.
  • Luttmann, Alexander

Abstract

This study provides empirical evidence documenting how COVID-19 affects intertemporal pricing and price dispersion in the U.S. domestic airline market. Studying a unique panel of 43 million fares collected before and after the outbreak of the pandemic, we find that airlines discounted fares by an average of 57% in the first five months of the pandemic relative to the five months that immediately preceded the pandemic. We also find that flight-level prices increased at a lower rate, particularly in the last week to departure. As a consequence, flight-level price dispersion decreased. These findings are consistent with the theoretical predictions arising from models of stochastic peak-load pricing and intertemporal price discrimination.

Suggested Citation

  • Gaggero, Alberto A. & Luttmann, Alexander, 2025. "How does COVID-19 affect intertemporal price discrimination and price dispersion? Evidence from the airline industry," International Journal of Industrial Organization, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:indorg:v:101:y:2025:i:c:s0167718725000372
    DOI: 10.1016/j.ijindorg.2025.103171
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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • I19 - Health, Education, and Welfare - - Health - - - Other

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