Airline Pricing Behaviour under Limited Intermodal Competition

Bergantino, Angela Stefania and Capozza, Claudia (2013): Airline Pricing Behaviour under Limited Intermodal Competition.

Abstract

This paper empirically analyses airline pricing for short-haul flights in contexts with no credible threat of inter-modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air-related competition. We show, in fact, that market power matters, depending on the level of intra-modal competition, and that airlines apply differentiated mark-ups. Besides, consistent with the implementation of inter-temporal price discrimination (IPD), we find a non-monotonic inter-temporal profile of fares with a turning point included in the interval of the 43th to 45th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD.

• Item Type: MPRA Paper
• Language: English
• Keywords: airfares, market structure, intertemporal price discrimination
• Subjects: 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; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation

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