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Price discrimination in Australasian air travel markets

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  • Tim Hazledine

Abstract

This paper explores oligopolistic pricing behaviour in the context of widespread price discrimination, as observed in domestic NZ and trans-Tasman air travel markets. These markets are of particular interest as being the domain of three substantial competition policy cases between 2002 and 2010, each involving proposals by Air New Zealand to form ‘alliances’ (cartels) with one of its competitors -- first, Qantas, and then Virgin Blue. Theoretical predictions are tested with internet-sourced pricing data covering the 2004--2006 period. It is found that market structure matters more for pricing in the ‘time-sensitive’ (business) sector of the market than for ‘price-sensitive’ leisure travellers. The implications drawn are that the regulatory authorities were correct to refuse permission for Air New Zealand's proposed alliances with Qantas, and may also be justified in their qualified approval of the 2010 proposal with Virgin Blue as a partner.

Suggested Citation

  • Tim Hazledine, 2011. "Price discrimination in Australasian air travel markets," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 311-324, July.
    • Handle: RePEc:taf:nzecpp:v:45:y:2011:i:3:p:311-324
    DOI: 10.1080/00779954.2011.606600
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    References listed on IDEAS

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    1. Joanna Stavins, 2001. "Price Discrimination in the Airline Market: The Effect of Market Concentration," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 200-202, February.
    2. Hazledine, Tim, 2011. "Legacy carriers fight back: Pricing and product differentiation in modern airline marketing," Journal of Air Transport Management, Elsevier, vol. 17(2), pages 130-135.
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    7. Hazledine, Tim, 2010. "Oligopoly price discrimination with many prices," Economics Letters, Elsevier, vol. 109(3), pages 150-153, December.
    8. Kristopher S. Gerardi & Adam Hale Shapiro, 2009. "Does Competition Reduce Price Dispersion? New Evidence from the Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 1-37, February.
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    Cited by:

    1. Tin H. Ho & Dat T. Nguyen & Thanh Ngo & Tu D. Q. Le, 2021. "Airfares Data in New Zealand Domestic Aviation Market," Sustainability, MDPI, vol. 13(16), pages 1-5, August.
    2. Gillen, David & Hazledine, Tim, 2015. "The economics and geography of regional airline services in six countries," Journal of Transport Geography, Elsevier, vol. 46(C), pages 129-136.
    3. Zhang, Yahua & Sampaio, Breno & Fu, Xiaowen & Huang, Zhibin, 2018. "Pricing dynamics between airline groups with dual-brand services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 46-59.
    4. David Gillen & Tim Hazledine, 2016. "Pricing of Regional Airline Services in Australia and New Zealand, 2011–2015," Economic Papers, The Economic Society of Australia, vol. 35(2), pages 87-98, June.

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