Purchase discounts on federal holidays: Evidence from the airline industry

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

Abstract

Discounts during Thanksgiving and Christmas are common in a variety of retail markets. Although classical economic theory predicts that prices should increase when aggregate demand is high, one possibility is that consumers are more price elastic during seasonal demand peaks. In this article, we examine holiday pricing in the airline industry. 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 1.8% cheaper, supporting the conjecture that airlines price discriminate when the mix of purchasing passengers makes demand more elastic. An increase in competition is associated with larger holiday purchase discounts, with the largest discounts reserved for flights within one-week of departure.

• 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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