Abstract

We test the hypothesis that price discrimination increases with competition in the airline market. Using a large cross section of tickets offered by several carriers on various routes, we approximate price discrimination with marginal implicit prices of ticket restrictions that carriers typically use to price discriminate: Saturday-night stayover re-quirements and advanced-purchase discounts. We find that the restrictions are associated with lower airfares, but that the discounts are smaller on routes with higher market concentration. The results suggest that price dispersion attributed to ticket restrictions increases as markets becomemore competitive.

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