We explore how pricing dynamics in the European airline industry vary with competition and document patterns that are consistent with intertemporal price discrimination. First, the rate at which prices increase over time decreases in competition, supporting the idea that competition restrains the ability of airlines to price-discriminate against late-arriving customers. Second, the sensitivity to competition increases in the heterogeneity of the customer base, reflecting that restraints on price discrimination are only relevant when there is initial scope for discrimination. The patterns explain 83 percent of the observed within-flight price dispersion and 17 percent of the cross-market variation in pricing dynamics.
Airline industry; capacity constraints; dynamic oligopoly pricing; intertemporal price dispersion; price discrimination;
- D43: Oligopoly and Other Forms of Market Imperfection
- D92: Intertemporal Firm Choice, Investment, Capacity, and Financing
- L11: Production, Pricing, and Market Structure • Size Distribution of Firms
- L93: Air Transportation
Caspar Siegert, and Robert Ulbricht, “Dynamic Oligopoly Pricing: Evidence from the Airline Industry”, TSE Working Paper, n. 14-478, March 2014, revised January 2019.
TSE Working Paper, n. 14-478, March 2014, revised January 2019