Pricing strategies by European Low Cost Carriers
We introduce an on-line pricing tactic where airlines post, at the same time and for the same flight, fares in different currencies that violate the law of One Price. Unexpectedly for an on-line market, we find that price discrimination may be accompanied by arbitrage opportunities and that both tend to persist before a flight’s departure. We find discrimination to be of a competitive type, although arbitrage opportunities are more likely in concentrated routes. Finally, the evidence suggests that discrimination may be used to manage stochastic demand.
|Date of creation:||Apr 2007|
|Date of revision:||Apr 2007|
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