Competition And Price Dispersion in the Us Airline Industry

Cover Competition And Price Dispersion in the Us Airline Industry
Competition And Price Dispersion in the Us Airline Industry
Severin Borenstein
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These effects are likely to be much stronger for business travelers than for discretionary travelers, since infrequent travelers are much less likely to be active FFP participants.^^ Since business travelers generally pay higher prices even in the absence of FFPs, these programs probably raise the dispersion of prices charged by an '" Neither Borenstein, 1985, nor Holmes, 1989, address multiproduct firms and we have found no other theoretical work that sheds light on these hypotheses. Our intui...tion is that the asymmetry in price discrimination is likely to occur in a spatial model in which each brand competes more directly with some set of "neighbors" than with the remainder of the brands. It is less likely to occur in a model in which each brand competes symmetrically with all other brands.
" Given that we have eliminated first-class and connecting service passengers from consideration.
'^ Given the nonlinear bonus schedules, customers who fly only a few times a year typically would take a number of years to qualify for bonus travel.


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