Price discrimination in the airline market: the effect of market concentration
Abstract: Economic theory suggests that a monopolist can price discriminate more successfully than can a perfectly competitive firm. Most real-life markets, however, fall somewhere in between the two extremes. What happens as the market becomes more competitive: Does price discrimination increase or decrease? This paper examines how price discrimination changes with market concentration in the airline market. The paper uses data on prices and ticket restrictions across various routes within the United States, controlling for distances and airport gate restrictions. Price discrimination is found to increase as the markets become more competitive.
Status: Published in Review of Economics and Statistics 83, no. 1 (February 2001).
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Provider: Federal Reserve Bank of Boston
Part of Series: Working Papers
Publication Date: 1996