Price Dispersion Over the Business Cycle: Evidence from the Airline Industry

27 Pages Posted: 18 Oct 2012

See all articles by Marco Cornia

Marco Cornia

affiliation not provided to SSRN

Kristopher Gerardi

Federal Reserve Bank of Atlanta

Adam Hale Shapiro

Federal Reserve Bank of San Francisco

Date Written: September 2012

Abstract

This study provides empirical evidence documenting how price dispersion moves with the business cycle in the airline industry. Performing a fixed‐effects panel analysis on seventeen years of data covering two business cycles, we find that price dispersion is highly pro‐cyclical. This effect is especially pronounced for legacy carriers relative to low‐cost carriers. We show that our empirical result is consistent with firms' implementing second‐degree price‐discrimination tactics.

Suggested Citation

Cornia, Marco and Gerardi, Kristopher S. and Shapiro, Adam Hale, Price Dispersion Over the Business Cycle: Evidence from the Airline Industry (September 2012). The Journal of Industrial Economics, Vol. 60, Issue 3, pp. 347-373, 2012, Available at SSRN: https://ssrn.com/abstract=2163383 or http://dx.doi.org/10.1111/j.1467-6451.2012.00488.x

Marco Cornia (Contact Author)

affiliation not provided to SSRN

Kristopher S. Gerardi

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8561 (Phone)

HOME PAGE: http://sites.google.com/site/kristophergerardishomepage/

Adam Hale Shapiro

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

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