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

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  • Luttmann, Alexander
  • Gaggero, Alberto A

Abstract

This study provides empirical evidence documenting how COVID-19 affects intertemporal price dispersion in the airline industry. Exploiting a unique panel of 43 million fares collected before and during the pandemic, we find that airlines discounted fares by an average of 57%. The rate of intertemporal price increases also declined, particularly in the last week to departure. We also find that flight-level price dispersion increased during the pandemic. Fare decreases (and the associated increase in price dispersion) are found to be driven primarily by the diffusion of COVID-19 at the destination as opposed to the origin market.

Suggested Citation

  • Luttmann, Alexander & Gaggero, Alberto A, 2022. "How does COVID-19 affect intertemporal price dispersion? Evidence from the airline industry," MPRA Paper 111797, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111797
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    More about this item

    Keywords

    airlines; COVID-19; intertemporal pricing; price dispersion;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • I19 - Health, Education, and Welfare - - Health - - - Other
    • 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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