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Price discrimination in the airline market: the effect of market concentration

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  • Joanna Stavins

Abstract

Economic theory suggests that a monopolist can price discriminate more successfully than can a perfectly competitive firm. Most real-life markets, however, fall somewhere in between the two extremes. What happens as the market becomes more competitive: Does price discrimination increase or decrease? This paper examines how price discrimination changes with market concentration in the airline market. The paper uses data on prices and ticket restrictions across various routes within the United States, controlling for distances and airport gate restrictions. Price discrimination is found to increase as the markets become more competitive.

Suggested Citation

  • Joanna Stavins, 1996. "Price discrimination in the airline market: the effect of market concentration," Working Papers 96-7, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:96-7
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    References listed on IDEAS

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    Airlines;

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