Purchase discounts and travel premiums during holiday periods: Evidence from the airline industry

Alexander Luttmann and Alberto Gaggero

MPRA Paper from University Library of Munich, Germany

Abstract: Discounts during Thanksgiving and Christmas are common in a variety of retail markets. Although classical economic theory predicts that prices should increase when aggregate demand is high, one possibility is that consumers are more price elastic during seasonal demand peaks. In this article, we examine holiday pricing in the airline industry. Exploiting a unique panel of almost 22 million fares, we find that fares purchased on a holiday are 1.8% cheaper, supporting the conjecture that airlines price discriminate when the mix of purchasing passengers makes demand more elastic. These holiday booking discounts are also found to be larger in competitive markets, with the largest discounts reserved for flights within one-week of departure. In contrast to flights purchased on a holiday, we find that traveling on a holiday is more expensive. Consistent with peak-load pricing, we estimate travel premiums ranging from 41.6% to 82.0% on national holidays and from 4.6% to 35.0% on federal holidays.

Keywords: advance-purchase discounts; airline pricing; peak-load pricing; price discrimination; sales (search for similar items in EconPapers)
JEL-codes: D40 L11 L13 L93 (search for similar items in EconPapers)
Date: 2020-12-21
New Economics Papers: this item is included in nep-com, nep-ind and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/104863/1/MPRA_paper_104863.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/105900/1/MPRA_paper_104863.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/105900/9/MPRA_paper_105900.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/108708/94/MPRA_paper_108708.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/111902/102/MPRA_paper_111902.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/119732/111/MPRA_paper_119732.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104863

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().