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Dynamic oligopoly pricing: Evidence from the airline industry

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  • Siegert, Caspar
  • Ulbricht, Robert

Abstract

We explore how pricing dynamics in the European airline industry vary with the competitive environment and with customer heterogeneity. We document three main findings. First, the rate at which prices increase towards the scheduled departure date is significantly reduced in more competitive markets. Second, the sensitivity of the intertemporal slope to competition increases in the heterogeneity of the customer base. Third, ex-ante predictable advance purchase discounts account for 83 percent of within-flight dispersion in prices and for 17 percent of cross-market variation in pricing dynamics.

Suggested Citation

  • Siegert, Caspar & Ulbricht, Robert, 2020. "Dynamic oligopoly pricing: Evidence from the airline industry," International Journal of Industrial Organization, Elsevier, vol. 71(C).
  • Handle: RePEc:eee:indorg:v:71:y:2020:i:c:s016771872030062x
    DOI: 10.1016/j.ijindorg.2020.102639
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    Cited by:

    1. Beestermöller, Matthias, 2017. "Striking Evidence? Demand Persistence for Inter-City Buses from German Railway Strikes," Discussion Papers in Economics 31768, University of Munich, Department of Economics.
    2. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
    3. Diego Escobari & Nicholas G. Rupp & Joseph Meskey, 2019. "An Analysis of Dynamic Price Discrimination in Airlines," Southern Economic Journal, John Wiley & Sons, vol. 85(3), pages 639-662, January.
    4. Escobari, Diego & Rupp, Nicholas & Meskey, Joseph, 2018. "Dynamic Price Discrimination in Airlines," MPRA Paper 88078, University Library of Munich, Germany.
    5. Yulia Dzhabarova & Stanimir Kabaivanov & Margarita Ruseva & Boyan Zlatanov, 2020. "Existence, Uniqueness and Stability of Market Equilibrium in Oligopoly Markets," Administrative Sciences, MDPI, Open Access Journal, vol. 10(3), pages 1-32, September.
    6. Kevin R. Williams, 2017. "Dynamic Airline Pricing and Seat Availability," Cowles Foundation Discussion Papers 2103R, Cowles Foundation for Research in Economics, Yale University, revised May 2020.

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    More about this item

    Keywords

    Airline industry; Dynamic oligopoly pricing; Intertemporal price dispersion; Price discrimination;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • 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

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