posted on 2007-05-14, 12:24authored byClaudio Piga, Enrico Bachis
We introduce an on-line pricing tactic where airlines post, at the same time and for the
same flight, fares in different currencies that violate the law of One Price. Unexpectedly for
an on-line market, we find that price discrimination may be accompanied by arbitrage
opportunities and that both tend to persist before a flight’s departure. We find discrimination
to be of a competitive type, although arbitrage opportunities are more likely in concentrated
routes. Finally, the evidence suggests that discrimination may be used to manage stochastic
demand.
History
School
Business and Economics
Department
Economics
Publication date
2007
Notes
This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_10.html.