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Firms operating in the electronic marketplace set and adjust prices to\udaffect demand and profitability. In service markets, such as airline markets,\uddifferent prices are commonly offered by diverse firms to accommodate to a\udvariety of market segments having particular sets of consumer attitudes. This\udvariation in prices is the price dispersion and is based on market distinctiveness\udderiving from customer heterogeneity as well as the peculiar competition in the\udspecific market arena. In this paper we use a panel dataset from the Italian\udairline market to investigate the role of competition and different online\udchannels in the emergence of price dispersion. Specifically, we examine the\udunclear role of competition in price dispersion with novel data collected from\uddifferent online channels, namely direct and Online Travel Agency (OTA)\udchannels. We find that price dispersion is higher in routes where competition is\udhigher even in presence of only one segment, namely the business segment.\udOur results also show that price dispersion significantly differs across different\udtypes of online channels

An empirical analysis of online price dispersion in the Italian airline industry