Pricing strategies by European Low Cost Carriers

Claudio Piga () and Enrico Bachis ()

Discussion Paper Series from Department of Economics, Loughborough 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. (search for similar items in EconPapers)
JEL-codes: L11 L13 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ifn, nep-ind, nep-mic, nep-mkt and nep-tur
Date: 2007-04, Revised 2007-04
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Persistent link: http://EconPapers.repec.org/RePEc:lbo:lbowps:2007_10

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