On the Extent to which the Presence of Intermediate-stop(s) Air Travel Products Influences the Pricing of Nonstop Air Travel Products

Philip Gayle () and Wu Chi-Yin
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Wu Chi-Yin: Department of Economics, Feng Chia University, 100 Wenhwa Rd., Seatwen, Taichung, Taiwan, 40724

Review of Network Economics, 2014, vol. 13, issue 3, 355-395

Abstract: Analysts of air travel markets, which include antitrust authorities, are interested in understanding the extent to which the presence of intermediate stop(s) products influences the pricing of nonstop products. This paper uses a structural econometric model to investigate the potential pricing interdependence between these two product types in domestic air travel markets. Counterfactual experiments using the estimated model suggest that in many (but far from a majority) markets the current prices of nonstop products are at least 5% lower than they would otherwise be owing to the presence of intermediate-stop(s) products.

Keywords: discrete choice demand model; substitutability and pricing interdependence between differentiated air travel products (search for similar items in EconPapers)
JEL-codes: L13 L40 L93 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Working Paper: On the Extent to which the Presence of Intermediate-stop(s) Air Travel Products Influences the Pricing of Nonstop Air Travel Products (2015)
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DOI: 10.1515/rne-2015-0023

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