 The competitive effects of product unbundling: Evidence from U.S. airlinesAlexander Fiore and Danielle Zanzalari Journal of Air Transport Management, 2023, vol. 112, issue C Abstract: This paper examines how one firm’s decision to unbundle its product affects its competitors’ pricing strategies. Existing literature discusses the effect on prices of the unbundling firm, but previous work often ignores the asymmetric scenario where one firm unbundles while the competing firm does not. We contribute to the literature by modeling and empirically testing the asymmetric case of product unbundling on competitors’ prices using a large dataset of U.S. domestic airfares. The variation in timing and implementation of bag fees among airlines during 2007-2009 provides a unique opportunity to identify the effects of product unbundling. We find competitor bag fees lead to lower ticket prices for a majority of airlines and routes. While the average effect is a 2% drop in ticket price, additional evidence indicates the reduction in ticket price is larger on longer routes and routes characterized as having a greater proportion of business travelers. Keywords: Airlines; Unbundling; Add-on pricing; Competitive effect; Bag fees (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:112:y:2023:i:c:s0969699723000972 DOI: 10.1016/j.jairtraman.2023.102454 Access Statistics for this article Journal of Air Transport Management is currently edited by Anne Graham More articles in Journal of Air Transport Management from Elsevier |
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