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

Alberto A. Gaggero and Alexander Luttmann

International Journal of Industrial Organization, 2025, vol. 101, issue C

Abstract: This study provides empirical evidence documenting how COVID-19 affects intertemporal pricing and price dispersion in the U.S. domestic airline market. Studying a unique panel of 43 million fares collected before and after the outbreak of the pandemic, we find that airlines discounted fares by an average of 57% in the first five months of the pandemic relative to the five months that immediately preceded the pandemic. We also find that flight-level prices increased at a lower rate, particularly in the last week to departure. As a consequence, flight-level price dispersion decreased. These findings are consistent with the theoretical predictions arising from models of stochastic peak-load pricing and intertemporal price discrimination.

Keywords: Airlines; COVID-19; Intertemporal price discrimination; Price dispersion (search for similar items in EconPapers)
JEL-codes: D40 I19 L11 L93 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:101:y:2025:i:c:s0167718725000372

DOI: 10.1016/j.ijindorg.2025.103171

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