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Price Discrimination in International Airline Markets

Gaurab Aryal (), Charles Murry () and Jonathan Williams ()
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Jonathan Williams: Department of Economics, University of North Carolina - Chapel Hill

No 968, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We develop a model of inter-temporal and intra-temporal price discrimination by airlines to study the ability of different discriminatory mechanisms to remove sources of inefficiency and the associated distributional implications. To estimate the model’s multi-dimensional distribution of preference heterogeneity, we use unique data from international airline markets with flight-level variation in prices across time and cabins, and information on passengers’ reason for travel. We find that current pricing practices grant late-arriving business passengers substantial informational rents and yield 81% of first-best welfare, with stochastic demand and asymmetric information accounting for 65% and 35% of the gap, respectively.

Keywords: dynamic pricing; screening; perishable goods (search for similar items in EconPapers)
JEL-codes: L00 D42 L93 (search for similar items in EconPapers)
Date: 2018-11-26
New Economics Papers: this item is included in nep-com, nep-ind and nep-tre
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