Carriers’ Price Dispersion in the U.S. Airline Industry

Junwook Chi, Won W. Koo and Siew Hoon Lim

No 207596, 50th Annual Transportation Research Forum, Portland, Oregon, March 16-18, 2009 from Transportation Research Forum

Abstract: This paper explores price dispersion in the U.S. airline industry by highlighting individual carriers’ price discrimination strategies. Using heteroskedasticity-adjusted instrumental variable technique, we found that individual carriers play crucial roles in determining price dispersion, implying that the carriers’ price discrimination strategies may influence variation in airfares. Based on the estimated price dispersion and the estimated average price, we distinguished sources of price dispersion by categorizing individual carriers’ pricing strategies. In 2005, for example, monopoly-type price discrimination was likely to result in price dispersion for Northwest, whereas competitive-type price discrimination was likely to lead to price dispersion for Delta. However, most of the carriers showed different types of pricing strategies under the same market conditions in 2000. Therefore, this paper supported evidence that the type of the pricing strategies is not equal across the U.S. air carriers.

Keywords: Research Methods/Statistical Methods; Resource/Energy Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 24
Date: 2009-03
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ndtr09:207596

DOI: 10.22004/ag.econ.207596

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