Discriminatory Product Differentiation: The Case of Israel's Omission from Airline Route Maps

55 Pages Posted: 11 Feb 2017 Last revised: 10 May 2018

Paul M. Vaaler

University of Minnesota, Twin Cities - Law School and Carlson School of Management

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER); University of Minnesota - Twin Cities - Department of Economics

Date Written: May 5, 2018

Abstract

While product differentiation is generally benign, it can be employed to discriminate against customer groups, either to enhance profitability by appealing to discriminatory customer preferences or in unprofitable ways that indulge owner tastes for discrimination. We investigate such discriminatory product differentiation by international airlines through their depictions of Israel on online route maps and whether their online inflight menus include kosher meal options. We first show that several airlines omit Israel from their online route maps. Three of these airlines are members of major international airline alliances. With data on over 100 airlines, we then document that online route map “denial” of Israel’s existence is more likely for airlines with customers from countries exhibiting greater anti-Semitism. Owner tastes also matter. Denial is more likely for state-owned airlines in countries that do not recognize Israel. Availability of kosher meal options follows similar patterns, suggesting greater interest in not serving Jewish rather than just Israeli customers. Neither online route map treatment nor ownership by states not recognizing Israel affects the likelihood of alliance membership with alliance leaders having few airline alternatives to choose from in the Middle East. The price of achieving greater international business scope in airlines is accommodation of regional allies with discriminatory customer practices many outside the region find repugnant even if subtly presented via product design.

Keywords: customer discrimination, product differentiation, airlines, alliances

JEL Classification: J15, L88, L93, M16, D74

Suggested Citation

Vaaler, Paul M. and Waldfogel, Joel, Discriminatory Product Differentiation: The Case of Israel's Omission from Airline Route Maps (May 5, 2018). Available at SSRN: https://ssrn.com/abstract=2912489 or http://dx.doi.org/10.2139/ssrn.2912489

Paul M. Vaaler (Contact Author)

University of Minnesota, Twin Cities - Law School and Carlson School of Management ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-625-4951 (Phone)
612-626-1316 (Fax)

HOME PAGE: http://carlsonschool.umn.edu/faculty/paul-vaaler

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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