Refundability and Price: Empirical Analysis on the Airline Industry

33 Pages Posted: 24 Sep 2010 Last revised: 15 Mar 2011

Makoto Watanabe

VU University Amsterdam, Tinbergen Institute

Seongman Moon

Universidad Carlos III de Madrid - Department of Economics

Date Written: September 20, 2010

Abstract

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

Watanabe, Makoto and Moon, Seongman, Refundability and Price: Empirical Analysis on the Airline Industry (September 20, 2010). Available at SSRN: https://ssrn.com/abstract=1681337 or http://dx.doi.org/10.2139/ssrn.1681337

Makoto Watanabe

VU University Amsterdam, Tinbergen Institute ( email )

De Boelelaan 1105,
Amsterdam, North Holland 1081 HV
Netherlands
+31 20 5986030 (Phone)

HOME PAGE: http://makoto.wtnb.googlepages.com

Seongman Moon (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain

Paper statistics

Downloads
125
Rank
189,385
Abstract Views
838