Abstract

http://ssrn.com/abstract=890104
 
 

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Is the Effect of Competition on Price Dispersion Non-Monotonic? Evidence from the U.S. Airline Industry


Mian Dai


Drexel University

Qihong Liu


University of Oklahoma - Department of Economics

Konstantinos Serfes


Drexel University--School of Economics

October 12, 2012


Abstract:     
We investigate the effect of competition on price dispersion in the airline industry. Using panel data from 1993 to 2008, we find a non-monotonic effect of competition on price dispersion. An increase in competition is associated with greater price dispersion in concentrated markets but is associated with less price dispersion in competitive markets (i.e. an inverse-U relationship). Our empirical findings are consistent with an oligopolistic second-degree price discrimination model and encompass contradictory findings in the literature.

Number of Pages in PDF File: 28

Keywords: Price Dispersion, Second-Degree Price Discrimination, Airline Industry

JEL Classification: D43, L11, L93

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Date posted: April 11, 2006 ; Last revised: October 12, 2012

Suggested Citation

Dai, Mian and Liu, Qihong and Serfes, Konstantinos, Is the Effect of Competition on Price Dispersion Non-Monotonic? Evidence from the U.S. Airline Industry (October 12, 2012). Available at SSRN: http://ssrn.com/abstract=890104 or http://dx.doi.org/10.2139/ssrn.890104

Contact Information

Mian Dai
Drexel University ( email )
Philadelphia, PA 19104
United States
Qihong Liu (Contact Author)
University of Oklahoma - Department of Economics ( email )
Norman, OK 73019-2103
United States
405-325-5846 (Phone)
405-325-5842 (Fax)
Konstantinos Serfes
Drexel University--School of Economics ( email )
3141 Chestnut St.
Philadelphia, PA 19104
United States
215-895-6816 (Phone)
215-571-4670 (Fax)
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