Nonlinear pricing strategies and competitive conditions in the airline industry
This paper empirically examines the effect of competitive conditions on nonlinear pricing strategies in the airline industry. We use a unique data set to analyze the impact of concentration and the competitive pressures generated by Southwest and other low cost carriers on the relative prices within...
| Main Authors: | , |
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| Format: | Journal Article |
| Language: | Inglés |
| Published: |
Wiley
2014
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10568/149918 |
| _version_ | 1855526569939828736 |
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| author | Hernandez, Manuel A. Wiggins, Steven N. |
| author_browse | Hernandez, Manuel A. Wiggins, Steven N. |
| author_facet | Hernandez, Manuel A. Wiggins, Steven N. |
| author_sort | Hernandez, Manuel A. |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | This paper empirically examines the effect of competitive conditions on nonlinear pricing strategies in the airline industry. We use a unique data set to analyze the impact of concentration and the competitive pressures generated by Southwest and other low cost carriers on the relative prices within a menu of fares. The menu orders tickets by quality based upon cabin and ticket restrictions. We analyze the ratio of fares charged for various qualities within the menu to the fares charged for the lowest quality nonrefundable, restricted tickets. We observe a fare compression for only the highest fares on only the most concentrated (i.e., monopoly) routes. This result is something of a puzzle given a monopolist's market power. We find, however, that actual and potential competition from Southwest reduces low end fares and generally leads to substantial fare compression throughout the fare menu. (JEL L11, L93) |
| format | Journal Article |
| id | CGSpace149918 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2014 |
| publishDateRange | 2014 |
| publishDateSort | 2014 |
| publisher | Wiley |
| publisherStr | Wiley |
| record_format | dspace |
| spelling | CGSpace1499182024-10-25T07:58:08Z Nonlinear pricing strategies and competitive conditions in the airline industry Hernandez, Manuel A. Wiggins, Steven N. price discrimination market structure aircraft This paper empirically examines the effect of competitive conditions on nonlinear pricing strategies in the airline industry. We use a unique data set to analyze the impact of concentration and the competitive pressures generated by Southwest and other low cost carriers on the relative prices within a menu of fares. The menu orders tickets by quality based upon cabin and ticket restrictions. We analyze the ratio of fares charged for various qualities within the menu to the fares charged for the lowest quality nonrefundable, restricted tickets. We observe a fare compression for only the highest fares on only the most concentrated (i.e., monopoly) routes. This result is something of a puzzle given a monopolist's market power. We find, however, that actual and potential competition from Southwest reduces low end fares and generally leads to substantial fare compression throughout the fare menu. (JEL L11, L93) 2014 2024-08-01T02:50:14Z 2024-08-01T02:50:14Z Journal Article https://hdl.handle.net/10568/149918 en Limited Access Wiley Hernandez, Manuel A.; and Wiggins, Steven N. 2014. Nonlinear pricing strategies and competitive conditions in the airline industry. Economic Inquiry 52(2): 539-561. https://doi.org/10.1111/ecin.12045 |
| spellingShingle | price discrimination market structure aircraft Hernandez, Manuel A. Wiggins, Steven N. Nonlinear pricing strategies and competitive conditions in the airline industry |
| title | Nonlinear pricing strategies and competitive conditions in the airline industry |
| title_full | Nonlinear pricing strategies and competitive conditions in the airline industry |
| title_fullStr | Nonlinear pricing strategies and competitive conditions in the airline industry |
| title_full_unstemmed | Nonlinear pricing strategies and competitive conditions in the airline industry |
| title_short | Nonlinear pricing strategies and competitive conditions in the airline industry |
| title_sort | nonlinear pricing strategies and competitive conditions in the airline industry |
| topic | price discrimination market structure aircraft |
| url | https://hdl.handle.net/10568/149918 |
| work_keys_str_mv | AT hernandezmanuela nonlinearpricingstrategiesandcompetitiveconditionsintheairlineindustry AT wigginsstevenn nonlinearpricingstrategiesandcompetitiveconditionsintheairlineindustry |