Price Discrimination in International Airline Markets

Gaurab Aryal (), Charles Murry and Jonathan W. Williams

Papers from arXiv.org

Abstract: We develop a model of inter-temporal and intra-temporal price discrimination by monopoly airlines to study the ability of different discriminatory pricing mechanisms to increase efficiency and the associated distributional implications. To estimate the model, we use unique data from international airline markets with flight-level variation in prices across time, cabins, and markets and information on passengers' reasons for travel and time of purchase. The current pricing practice yields approximately 77% of the first-best welfare. The source of this inefficiency arises primarily from private information about passenger valuations, not dynamic uncertainty about demand. We also find that if airlines could discriminate between business and leisure passengers, total welfare would improve at the expense of business passenger surplus. Also, replacing the current pricing that involves screening passengers across cabin classes with offering a single cabin class has minimal effect on total welfare.

Date: 2021-02, Revised 2022-12
New Economics Papers: this item is included in nep-com, nep-ind and nep-tre
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Citations: View citations in EconPapers (4)

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http://arxiv.org/pdf/2102.05751 Latest version (application/pdf)

Related works:
Journal Article: Price Discrimination in International Airline Markets (2024)
Working Paper: Price Discrimination in International Airline Markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2102.05751

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