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Pricing of imperfect substitutes: The next flight is not the same flight

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  • van den Bogaard, Julien E.
  • Lijesen, Mark G.

Abstract

We investigate how airfares respond to changes in the fare of adjacent flights. Using a fixed effects regression on fares from Amsterdam to Geneva, we find flights that only differ in departure times to be weak substitutes. Fare-to-fare elasticities for imperfect substitute flights of different airlines are even smaller, implying weak competition between airlines on this specific route.

Suggested Citation

  • van den Bogaard, Julien E. & Lijesen, Mark G., 2019. "Pricing of imperfect substitutes: The next flight is not the same flight," Research in Transportation Economics, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:retrec:v:78:y:2019:i:c:s0739885919302537
    DOI: 10.1016/j.retrec.2019.100741
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    More about this item

    Keywords

    Imperfect substitutes; Pricing; Airlines; Product differentiation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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