IDEAS home Printed from https://ideas.repec.org/p/brh/wpaper/1010.html
   My bibliography  Save this paper

Low–cost fare response to new entry

Author

Listed:
  • Paolo Malighetti
  • Stefano Paleari
  • Renato Redondi

    ()

Abstract

This study analyzes easyJet’s fare response to new entry. Traditionally, this stream of literature has focused on the reactions of network carriers to competition from low–cost carriers. As low–cost services spread, however, the number of low–cost incumbents is rising. This paper aims to shed light on low–cost price behaviour in the European context. The analysis is based on an original dataset composed of all fares offered by easyJet up to 90 days before departure, on all flights during the period 2007–2009. We focus on short–term price reactions by employing the event study methodology. We decompose the price response into three terms: the average fare, dynamic pricing, and fare dispersion around the predicted price curve. Our results show that easyJet’s temporal price discrimination tends to decrease after a new entry, especially when the new entrant is a traditional carrier. There is also some evidence for an average fare reduction of about 3%.

Suggested Citation

  • Paolo Malighetti & Stefano Paleari & Renato Redondi, 2010. "Low–cost fare response to new entry," Working Papers 1010, Department of Economics and Technology Management, University of Bergamo.
  • Handle: RePEc:brh:wpaper:1010
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10446/751
    Download Restriction: no

    More about this item

    Keywords

    low-cost incumbent; easyJet; fare response;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:brh:wpaper:1010. 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: (University of Bergamo Library). General contact details of provider: http://edirc.repec.org/data/diberit.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.