Refundability and Price: Empirical Analysis on the Airline Industry
33 Pages Posted: 24 Sep 2010 Last revised: 15 Mar 2011
Date Written: September 20, 2010
This paper provides new evidence on price dispersion in the US airline industry. Using the observed fare differences between refundable and non-refundable tickets, we first document evidence on the prices passengers pay for an option of returning their tickets. We found that the factors related to the value of refund option and customers' demand uncertainties have a significant impact on the relative refund fares. This finding turns out to be robust for various market structures. Further, taking into account the differential patterns of the relative refund fares, we investigate the impact of market structure on price dispersions.
Keywords: Price discrimination, Refundability, Competition, Airline industry
JEL Classification: D43, L13, L93
Suggested Citation: Suggested Citation