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Pricing strategies by European low cost carriers

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posted on 14.05.2007, 12:24 by Claudio 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.

ISSN

1750-4171

Language

en