Dynamic Oligopoly Pricing: Evidence from the Airline Industry

Caspar Siegert and Robert Ulbricht

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We explore how pricing dynamics in the European airline industry vary with the competitive environment. Our results highlight substantial variations in pricing dynamics that are consistent with a theory of intertemporal price discrimination. First, the rate at which prices increase towards the scheduled travel date is decreasing in competition, supporting the idea that competition restrains the ability of airlines to price-discriminate. Second, the sensitivity to competition is substantially increasing in the heterogeneity of the customer base, reflecting further that restraints on price discrimination are only relevant if there is initial scope for price discrimination. These patterns are quantitatively important, explaining about 83 percent of the total within-flight price dispersion, and explaining 17 percent of the observed cross-market variation of pricing dynamics.

Keywords: Airline industry; capacity constraints; dynamic oligopoly pricing; intertemporal price dispersion; price discrimination (search for similar items in EconPapers)
JEL-codes: D43 D92 L11 L93 (search for similar items in EconPapers)
Date: 2014-03-23
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-mkt, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Dynamic oligopoly pricing: Evidence from the airline industry (2020)
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