Looking for empirical papers that estimate the impact of LCC competition on the intertemporal price discrimination pattern of airlines. Any suggestions?
It is indeed an issue scarcely discussed in the previous literature.
Mantin and Koo (2009)1 give some insight about it, finding evidence that FSC tend to adopt more agressive high-low pricing strategy in the presence of LCC.
Contrarily, Bilotkach and Rupp (2012)2 affirm that price changes are smoother on routes which a LCC is present.
Gaggero and Piga (2011)3 and Bergantino and Capozza (2015)4 adress the impact of competition on the IPD strategies, but not specifically LCC competition.
1 B. Mantin and B. Koo, “Dynamic price dispersion in airline markets,” Transp. Res. Part E Logist. Transp. Rev., vol. 45, no. 6, pp. 1020–1029, Nov. 2009.
2 V. Bilotkach and N. G. Rupp, “A guide to booking airline tickets online.,” in Pricing Behavior and Non-Price Characteristics in the Airline Industry (Advances in Airline Economics, Volume 3), J. Peoples, Ed. Bingley, UK: Emerald Group Publishing Limited, 2012, pp. 83–105.
3 A. A. Gaggero and C. A. Piga, “Airline market power and intertemporal price dispersion,” J. Ind. Econ., vol. 59, no. 4, pp. 552–577, 2011.
4 A. S. Bergantino and C. Capozza, “Airline Pricing Behaviour Under Limited Inter-Modal Competition,” Econ. Inq., vol. 53, no. 1, pp. 700–713, 2015.
Excellent research question: I have seen an empirical research directly on the question. My earlier work (Brander, J.A. and A. Zhang (1993), “Dynamic Oligopoly Behaviour in the Airline Industry,” International Journal of Industrial Organization, Vol. 11 (September), pp. 407-435) for example deals with dynamic competition between two FSCs, rather than between FSC and LCC. There are plenty of papers on the impact of LCCs on FSCs' and the whole market's outputs/traffic volumes (e.g., Morrison (2001, JTEP), and most recently, Zhang, Y. and A. Zhang (2016), "Determinants of air passenger flows in China and gravity model: Deregulation, LCC, and high speed rail," Journal of Transport Economics and Policy, forthcoming).
Best wishes for carrying out your study!
Anming
what are the differences between American Airline and Southwest Airline pricing strategies?
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