Pricing strategies by European low cost carriers
preprintposted on 2007-05-14, 12:24 authored 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.
- Business and Economics
NotesThis is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_10.html.