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On the Absence of Directional Price Discrimination in the U.S. Airline Industry*
Author(s) -
Lewis Matthew S.
Publication year - 2020
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12230
Subject(s) - price discrimination , oligopoly , competition (biology) , economics , microeconomics , predatory pricing , industrial organization , pricing strategies , econometrics , monopoly , cournot competition , ecology , biology
Certain forms of price discrimination in oligopoly markets can lead to more aggressive competition and lower profits, yet few empirical studies examine how extensively such strategies are used. I consider one such strategy, testing whether airlines charge different prices on the same flights to passengers that originate from different endpoints. Using fare quote data I formulate a new approach to measure discrimination while controlling for cost heterogeneity and find that carriers within the U.S. domestic market do not engage in directional price discrimination despite frequently using other similar pricing strategies that are unlikely to enhance competition.