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Please use this identifier to cite or link to this item: https://dspace.lboro.ac.uk/2134/2770

Title: Hub premium, airport dominance and market power in the European airline industry
Authors: Piga, Claudio
Bachis, Enrico
Keywords: On-line pricing
Price discrimination
Dispersion
Yield management
Issue Date: 2007
Abstract: Using evidence from an original dataset of more than 12 million fares, this study sheds light on two issues relating to the pricing behaviour of the main European airlines: 1) the extent to which an airline’s dominant position at the origin airport, at the route and the city-pair level affects the airlines’ market power; 2) whether fares follow a monotonic time path consistent with the pursuing of an inter-temporal price discrimination strategy. Our estimates reveal that enjoying a dominant position within a route is conducive to higher fares, possibly because of the limited size of many “natural monopoly” routes that facilitate the incumbent’s engagement in a limit pricing strategy. On the contrary, a larger share within a city-pair does not seem to facilitate the exercise of market power, thereby suggesting the existence of a large degree of substitutability between the routes in a city-pair.
Description: This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_11.html.
URI: https://dspace.lboro.ac.uk/2134/2770
ISSN: 1750-4171
Appears in Collections:Working Papers (Economics)

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