How does COVID-19 affect intertemporal price dispersion? Evidence from the airline industry

Luttmann, Alexander and Gaggero, Alberto A (2022): How does COVID-19 affect intertemporal price dispersion? Evidence from the airline industry.

Abstract

This study provides empirical evidence documenting how COVID-19 affects intertemporal price dispersion in the airline industry. Exploiting a unique panel of 43 million fares collected before and during the pandemic, we find that airlines discounted fares by an average of 57%. The rate of intertemporal price increases also declined, particularly in the last week to departure. We also find that flight-level price dispersion increased during the pandemic. Fare decreases (and the associated increase in price dispersion) are found to be driven primarily by the diffusion of COVID-19 at the destination as opposed to the origin market.

• Item Type: MPRA Paper
• Language: English
• Keywords: airlines, COVID-19, intertemporal pricing, price dispersion
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; I - Health, Education, and Welfare > I1 - Health > I19 - Other; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation

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