|
on Tourism Economics |
| By: | Claudio A. Piga (Dept of Economics, Loughborough University); Enrico Bachis (Business School, Nottingham University) |
| Abstract: | Using evidence from an original dataset of more than 12 million fares, this study sheds light on two issues relating to the pricing behaviour of the main European airlines: 1) the extent to which an airline’s dominant position at the origin airport, at the route and the city-pair level affects the airlines’ market power; 2) whether fares follow a monotonic time path consistent with the pursuing of an inter-temporal price discrimination strategy. Our estimates reveal that enjoying a dominant position within a route is conducive to higher fares, possibly because of the limited size of many “natural monopoly” routes that facilitate the incumbent’s engagement in a limit pricing strategy. On the contrary, a larger share within a city-pair does not seem to facilitate the exercise of market power, thereby suggesting the existence of a large degree of substitutability between the routes in a city-pair. |
| Keywords: | on-line pricing; price discrimination; dispersion; yield management. |
| JEL: | L11 L13 L93 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2007_11&r=tur |
| By: | Claudio A. Piga (Dept of Economics, Loughborough University); Enrico Bachis (Business School, Nottingham University) |
| Abstract: | 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. |
| Keywords: | on-line pricing; price discrimination; Law of One Price; sample selection; dispersion; airlines, exchange rate. |
| JEL: | L11 L13 L93 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2007_10&r=tur |