Systematic peak-load pricing during holiday periods: Evidence from the U.S. airline industry

Luttmann, Alexander and Gaggero, Alberto A (2024): Systematic peak-load pricing during holiday periods: Evidence from the U.S. airline industry. Published in: Economics of Transportation No. 41 (30 January 2025): p. 100395.

Abstract

When faced with capacity constraints, firms may moderate demand by increasing prices when demand is known to be high ex-ante (i.e., systematic peak-load pricing). In this article, we examine the extent and duration of systematic peak-load pricing in the days surrounding public holidays in the U.S. airline industry. Applying two-stage least squares techniques to a unique panel of over 18 million fares, we estimate travel premiums ranging from 4.3% to 83.1% in the days surrounding national holidays and from 2.7% to 34.7% in the days surrounding federal holidays. We also find that the duration of the peak-travel period is longer for national holidays and shorter for federal holidays. Examining heterogeneity in holiday peak-load pricing, we find some evidence that travel premiums during national holidays are larger on longer-distance routes, on routes to or from slot-controlled airports, on routes to leisure destinations, and on ultra-low-cost carriers.

• Item Type: MPRA Paper
• Language: English
• Keywords: advance-purchase discounts, airline pricing, price discrimination, systematic peak-load pricing
• 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; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R49 - Other

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