Purchase discounts on federal holidays and adjacent shopping holidays: Evidence from the airline industry

Luttmann, Alexander and Gaggero, Alberto A (2020): Purchase discounts on federal holidays and adjacent shopping holidays: Evidence from the airline industry.

Abstract

Discounts during Thanksgiving and Christmas are common in a variety of retail markets. In this article, we examine whether holiday discounts extend to the airline industry. In contrast to many retail markets where purchased goods are meant for immediate consumption (e.g., groceries), goods in airline markets are often consumed in the future due to advance purchases. Exploiting a unique panel of almost 22 million fares, we find that fares purchased on a holiday for flights in the sixty-day period following the holiday are 1.9% cheaper, supporting the conjecture that airlines price discriminate when demand is lower than average or when the mix of purchasing passengers makes demand more elastic. These holiday discounts also do not vary with the level of competition, indicating that market structure has no impact on the magnitude of the holiday purchase discount.

• Item Type: MPRA Paper
• Language: English
• Keywords: advance-purchase discounts, airline pricing, competition, price discrimination, sales
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation

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