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On the Absence of Directional Price Discrimination in the U.S. Airline Industry

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  • Matthew S. Lewis

Abstract

Certain forms of price discrimination in oligopoly markets can lead to more aggressive competition and lower profits, yet few empirical studies examine how extensively such strategies are used. I consider one such strategy, testing whether airlines charge different prices on the same flights to passengers that originate from different endpoints. Using fare quote data I formulate a new approach to measure discrimination while controlling for cost heterogeneity and find that carriers within the U.S. domestic market do not engage in directional price discrimination despite frequently using other similar pricing strategies that are unlikely to enhance competition.

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  • Matthew S. Lewis, 2020. "On the Absence of Directional Price Discrimination in the U.S. Airline Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 68(3), pages 556-581, September.
    • Handle: RePEc:bla:jindec:v:68:y:2020:i:3:p:556-581
    DOI: 10.1111/joie.12230
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    References listed on IDEAS

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    1. Luttmann, Alexander & Gaggero, Alberto A, 2020. "Purchase discounts and travel premiums during holiday periods: Evidence from the airline industry," MPRA Paper 104863, University Library of Munich, Germany.
    2. Lewis, Matthew S., 2021. "Identifying airline price discrimination and the effect of competition," International Journal of Industrial Organization, Elsevier, vol. 78(C).

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