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Discriminatory fares: identifying predatory behaviour

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  • Hanlon, Pat

Abstract

This paper examines the economics of discrimination in airline fares and raises the question of when it may be desirable and when undesirable. One of the main points in this debate concerns the use of discriminatory pricing as a strategic weapon in competition against other airlines. Discriminatory air fares have sometimes been described as predatory pricing, something currently under examination in Brussels by the European Commission, which is considering issuing some guidelines on the practice. The paper addresses the main issues involved and discusses the implications of discrimination and predation for airline competition generally. One of the main points it makes is that fares can sometimes be predatory even when set above the airline's short-run cost. It concludes by suggesting an approach in which the dynamic and strategic nature of predatory behaviour would be recognized.

Suggested Citation

  • Hanlon, Pat, 1994. "Discriminatory fares: identifying predatory behaviour," Journal of Air Transport Management, Elsevier, vol. 1(2), pages 89-102.
  • Handle: RePEc:eee:jaitra:v:1:y:1994:i:2:p:89-102
    DOI: 10.1016/0969-6997(94)90004-3
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Severin Borenstein, 1992. "The Evolution of U.S. Airline Competition," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 45-73, Spring.
    3. John Vickers, 1985. "The economics of predatory practices," Fiscal Studies, Institute for Fiscal Studies, vol. 6(3), pages 24-36, August.
    4. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
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    Keywords

    pricing; airline competition; predation;

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