Price discrimination by day-of-week of purchase: Evidence from the U.S. airline industry

Steven Puller () and Lisa M. Taylor

Journal of Economic Behavior & Organization, 2012, vol. 84, issue 3, 801-812

Abstract: This paper identifies a source of price discrimination utilized by airlines – price discrimination based on the day-of-the-week that a ticket is purchased. Using unique transaction data, we compare tickets on the same airline and route that are purchased on different days of the week, after controlling for the day of week of travel, the ticket restrictions, the demand characteristics of the flights, and the number of days in advance that the ticket is purchased. We find that fares are 5% lower when purchased on the weekend. We conjecture that this is a form of price discrimination. If airlines believe that weekend purchasers are more likely to be price-elastic leisure travelers, then they may offer lower prices on weekends when the mix of purchasing customers makes demand more price elastic. This conjecture is supported by the finding that the weekend purchase effect is distinctly larger on routes with a mixture of both business and leisure customers than on routes that disproportionately serve leisure customers. We illustrate that this pricing practice can have important impacts on airline profits. These results have implications for other industries that have the ability to change prices daily based upon the types of customers who purchase on a specific day.

Keywords: Price discrimination; Airline pricing (search for similar items in EconPapers)
JEL-codes: L1 L8 L9 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:84:y:2012:i:3:p:801-812

DOI: 10.1016/j.jebo.2012.09.022

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